HOUSTON Several planned
liquid natural gas (LNG) export projects should prove positive
for the domestic pipe industry as they are expected to boost
prices, according to TMK Ipsco chairman Piotr Galitzine.
"My prediction is that with all
the announced LNG export projects, we are going to see before
the decade is out a convergence between U.S. gas prices and
Western European gas prices," Galitzine said at
AMMs 6th annual Steel Tube and Pipe Conference
in Houston. He pegged U.S. prices for LNG at around $3.30 per
million British thermal units (mmBtu) and European prices at
about $12 per mmBtu.
The United States likely will
become a net exporter of LNG by 2016, although gas prices
likely will remain low until exports kick off, he said.
LNG exports are expected to peak
at about 6 billion cubic feet per day, according to National
Economic Research Associates Inc. (Nera) data cited by
Galitzine, with minimal inflation expected for domestic
consumers as a result. "Nera has shown that exporting LNG is
good and exporting more is even better," he said.
TMK also anticipates increased
uses for LNG, including as fuel for trucks, tractor-trailers
and large shipping vessels.
Possible exploitation of shale
plays in Europe are unlikely to make a major dent in the United
States export markets for the product as success of
exploration there has been mixed, Galitzine said. "We
dont see shale gas from Europe being a market
The Houston-based company
expects domestic demand for pipe to keep growing over the
coming years, allowing the market to absorb the additional
capacity for energy tubulars planned by a number of domestic
and foreign producers.
Galitzine said that the added
capacity can be absorbed, noting that "the amount of tons
consumed by each drilling rig never ceases to go up and up and
In 2008, the company assumed
consumption of about 1,400 tons of pipe per drill rig,
projections which have now increased to more than 3,000 tons
for gas and almost 4,000 tons for oil, according to
The growing number of imports
likely will be displaced by the domestic projects. "Youre
going to have a certain throttling of imports simply because
the logistics from a national supplier is that much shorter and
quicker," he said.
However, the added capacity
could crimp prices in the short term. "We assume that the usual
rules will apply. If somebody wants to get into a market, there
is probably going to be an ugly price war first before things
stabilize again," Galitzine said.
There has been talk recently of
a possible trade case against large importers of energy
tubulars, which market sources said would bring some relief on
prices. "As a confirmed free-marketer, I think they (imports)
are a distortion, but as far as any discussion ongoing now, I
cant comment on that," Galitzine said.
TMK Ipsco is a subsidiary of
Moscow-based steelmaker OAO TMK.