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Piping Hot

The pipe industry is a beneficiary of the inceasing activity in the oil and gas sector

Way back in 2000, Ramesh Mansukhani, Chairman, Man Group, had stated that “with refining capacity on the rise, movement of oil and gas is expected to gain momentum”. Now, in retrospect, one can see that he was bang on target. More recently, Indresh Batra, MD, Jindal Saw, was quoted in the press as saying that "the period between 2008 and 2012 will be the golden period for Indian pipe manufacturers." Look at the dynamics. Oil and gas companies have certainly earned their place in the sun. But after the discovery comes the transportation and movement, so to speak. The anticipated growth in that sector is naturally expected to translate into higher revenues for the line pipe manufacturing industry.

Depleting oil reserves have led to an increase in exploration efforts resulting in more wells. Demand for seamless pipes is directly proportional to the increase in number of wells. With rising crude oil prices, control on oil transportation cost is gaining more prominence. The share of pipelines in oil transportation in India is around 33 per cent as against 75 per cent in developed countries. Transportation through pipelines offers the advantage of low operating costs (it is cheaper when compared to road transport), safety, eco-friendliness and protection against pilferage. Pipeline infrastructure in India is likely to almost double in the next five years. Not only is India witnessing domestic heightened activity post the New Exploration and Licensing Policy (NELP), but USA and the Middle East will be the key international drivers for Indian pipe players.

Seamless pipes are high-tensile steel pipes used under extreme conditions such as those at oil fields. They are made by boring a hole through a steel bar and then rolling it. On the other hand, submerged arc welded (SAW) pipes are made by fusing together steel plates and rolling them into the form of pipe.

They are mainly used in oil and natural gas transportation. The demand for such pipes will be driven by exploration and transportation activities.

Prominent players in this sector include Jindal SAW, Man Industries, Maharashtra Seamless, PSL Holdings Ltd and Welspun Gujarat Stahl Rohren. These companies have full order book positions that cater to domestic and international demand. Now the news is that GAIL (India) Ltd. is considering diversifying into gas pipeline construction to increase the synergy in its core activity (gas transmission and marketing). Pipeline infrastructure is emerging as a lucrative segment of the overall infrastructure story.

Be part of it.