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LNG exports bode well for US tube market

Keywords: Tags  Piotr Galitzine, TMK Ipsco, pipe and tube, LNG, liquid natural gas, AMM 6th annual Steel Tube and Pipe Conference, Thorsten Schier

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 AMM’s 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 don’t see shale gas from Europe being a market driver."

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 up."

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 Galitzine.

The growing number of imports likely will be displaced by the domestic projects. "You’re 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 can’t comment on that," Galitzine said.

TMK Ipsco is a subsidiary of Moscow-based steelmaker OAO TMK.

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