Russian pipeline manufactures win major contracts
Posted: 23 October 2003
Russian pipeline manufactures have won major contracts as part
of one the most significant pipeline projects to be undertaken worldwide
in the last decade, following Sakhalin Energy’s announcement
that it has completed the awards for linepipe and pipe coating for
the on and offshore pipelines for Phase 2 of the Sakhalin II project.
ZAO United Metalurgical Company (OMK) will produce and coat 45,000
tonnes of pipes at its Vyksa Steel Works mill in an order worth
some $36 million as part of a joint venture with the Japanese Mitsui
& Co., Ltd. This contract will also involve further Russian
industry involvement through using steel plate supplied by Russian
steel manufacturer Severstal.
Under a separate set of awards, OOO Transpromresurs will construct
a new, high technology pipe coating plant in Vostochy as part of
a joint venture with Mitsubishi Corporation of Japan. The new coating
plant is expected to cost some $15 million, and the pipe coating
work will be worth a further $35 million. The joint venture, ZAO
Metal Trans Far East, will also supply logistics services for the
transport of materials and finished coated pipe.
These significant linepipe contracts follow Sakhalin Energy’s
award of a contract worth some $1.2 billion to Russian company Starstroi,
which heads up a consortium which will construct and install the
800 km of onshore pipelines required under the $10 billion Phase
2 project to bring oil and gas to export terminals in the south
of the island
Vyksa will supply 38,000 tonnes of 24 inch pipe and 7,600 tones
of 20 inch pipe. ZAO Metal Trans Far East’s new coating yard
will be used to coat a variety of pipe sizes in preparation for
installation onshore, including 1200 mm (48 inch), 610 mm (24 inch)
and 550 mm (20 inch).
Steve McVeigh, Chief Executive Officer of Sakhalin Energy, said:
“The combination of these line-pipe awards and the onshore
pipeline construction contract clearly shows the major part Russian
industry is playing in this enormous and technologically advanced
project.
“These line pipe awards give us the best of both worlds –
major involvement of Russian pipe manufacturing industry, and technology
transfer and state of the art capacity expansion in pipe coating
operations in Russia.”
The line-pipe and coating awards to Vyksa and ZAO Metal Trans Far
East will also lead to upgraded facilities and create significant
employment. Vyksa has already undertaken substantial upgrade work
in the area of quality assurance equipment to worldclass standards.
More than 2,000 employees at Vyksa will be involved in the Sakhalin
II linepipe contract, and 5,000 employees will be processing the
order at Severstal.
Mr Anatoliy Sedykh, President of OMK, said: “This is one
of the largest pipeline projects in the world, and the ability of
Vyksa to win such a significant part of the line-pipe supply against
stiff competition from both Russian and foreign companies is a major
success for us and Russian pipe manufacturing. We believe the upgrades
we have made to our plant and our co-operation with Mitsui provides
real opportunities for winning further line-pipe orders both in
Russia and internationally.”
ZAO Metal Trans Far East’s new coating plant in Vostochny
will create more than 200 jobs, and recruitment has already started.
It will also allow local employees to be trained in the latest pipe
coating techniques.
Mr. Igor Panfilov, General Director of Transpromresurs said: “We
are very pleased in the trust shown in us by Metal One. Construction
of the coating plant has been made possible through the good understanding
reached between Transpromresurs and Metal One during common work
under the project. The opening of this plant at Nakhodka will mean
not only new jobs, but also the attraction of additional logistical
flows to Vostochny port, and consequently increased revenues for
the local community. Besides the control of the production quality
at the plant, we have been paying special attention to safety and
environment protection.
“The good geographical location of the plant near to Vostochny
port and the modern technology we will be using allow us to expect
that the plant could be used for other oil and gas pipeline projects
in the Asia-Pacific region in the future.”
The size of the linepipe orders for the Phase 2 Project pipelines,
the tight delivery requirements to meet the project schedule of
pipelines completion - by 2005 for the oil line and 2006 for the
gas line - and the technical specifications for offshore and high
pressure gas lines are a significant challenge. Such large contracts
are rarely fulfilled in one country, and Russia is no exception.
While Russian industry is playing a significant part in the Sakhalin
II Phase 2 pipelines, some of the more technically complex and offshore
linepipe for the Phase 2 project will be supplied by Russian company
joint venture partners Mitsui and Mitsubishi’s Metal One Corporation.
An Italian pipe manufacturer will also supply some of the 1200 mm
gas line-pipe.
Onshore pipelines Project Manager Jaap Guyt said: “We have
worked hard during the last 18 months to create the opportunity
for Russian companies to join the international effort required
to supply the enormous quantities of pipe required. We split the
line-pipe into smaller, more manageable batches to provide increased
opportunities for Russian mills, and there was stiff competition
between Russian and international bidders for the contracts.
“However, capacity constraints in the production time period,
technical requirements for offshore linepipe - which is new to Russia
- and the requirement for large quantities of 1200 mm, 100 bar rated
high pressure gas pipe – a specification that is currently
not available from Russian manufacturers – meant the ability
of Russian companies to manufacture pipes for the project was a
challenge. It is therefore a matter of considerable satisfaction
that Vyksa and Transpromresurs will be playing such a significant
role in the Phase 2 pipelines project.”
The pipeline requirements for the Phase 2 Project call for about
167 km of offshore oil and gas lines to bring the gas and oil from
three offshore platforms to shore. A further 800 km of onshore oil
and gas pipelines (total linepipe length of 1600 km) will be constructed
to bring oil and gas to the planned oil export terminal and natural
gas liquefaction plant to be built at Prigorodnoye in the south
of Sakhalin island.
Further Inquiries: Sakhalin Energy Sakhalin Energy (Yuzhno-Sakhalinsk)
(Moscow) + 7 4242 73 2000 + 7 095 956 1750 Notes for editors
Sakhalin Energy Investment Company Ltd. is an incorporated company,
established in April, 1994 and based in Yuzhno-Sakhalinsk, Russia
for the purpose of the implementation of and development of the
Sakhalin 2 integrated oil and gas project. The shareholders in Sakhalin
Energy are: Shell Sakhalin Holdings B.V. with 55 % interest (parent
company – Royal Dutch/Shell), Mitsui Sakhalin Holdings B.V.
with 25% (parent company – Mitsui & Co., Ltd.) and Diamond
Gas Sakhalin B.V. with 20 % (parent company – Mitsubishi Corporation).
The Sakhalin II development represents the largest single foreign
direct investment project underway in Russia at the moment. It is
the first Production Sharing Agreement (PSA) to be signed in Russia
and the first PSA to go into operation following commencement of
oil production under Phase I of the Sakhalin 2 Project.
Phase I has been successfully producing oil from the Vityaz Complex
offshore Sakhalin since July 1999. The Vityaz complex consists of
the Molikpaq production platform, a single anchor leg mooring buoy
and the Okha floating storage and offloading unit, and is located
on the on Astokh feature of the Piltun Astokhskoye (PA) reservoir
offshore Sakhalin. The Molikpaq is the first offshore oil production
platform in the Russian Federation.
Production is currently limited to the ice-free period during the
summer months. Production during the 2002 season amounted to 10.8
million barrels, which has been exported to customers in Japan,
China, and Korea.
Operations are well advanced to commence the Molikpaq’s fifth
production season at the beginning of June. Target crude oil production
this season is 9.7 million barrels – about 70,000 b/d. The
reduction in volume over previous seasons is due to natural pressure
reduction in the reservoir. A pressure maintenance project (PMP)
is currently underway to boost production back up to early production
levels of 90,000 b/d using water injection to re-pressurise the
reservoir.
The PMP calls for the installation of new water injection and power
generation modules on the Molikpaq. The PMP modules have been built
by Amur Shipyard in Khomsomolsk, and represent the first work of
their type that has been undertaken by the Russian Far Eastern shipyard.
The modules were lifted on to the Molikpaq earlier this summer,
and work on the hook-up and testing of the PMP facilities is underway
and expected to be completed by the end of the year in time for
the 2004 production season.
Phase 2 of the project is thought to be the biggest single integrated
oil and gas project ever undertaken, and calls for the further development
of the PA field — an oil reservoir with associated gas —
and the development of the Lunskoye field — a gas reservoir
with associated condensate. Apart from the LNG plant, the project
also calls for a new oil and gas production platform on the PA field,
and a new platform on the Lunskoye field.
An onshore processing facility will be built to separate gas and
condensate from the Lunskoye field. The Phase II project will also
enable year round production from the Molikpaq following the installation
of offshore pipelines that will bring the oil ashore at Piltun Bay.
Additionally, the project will require major upgrades to the island’s
infrastructure — including roads, bridges, railways and Nogliki
airport and Kholmsk port — which will be funded by Sakhalin
Energy in support of both the project and the island. Work on the
infrastructure upgrades — which will cost about $300 million
— is already more than 50 per cent complete.
Construction activities of the project elements are dependent on
Government final approvals, which are expected to be completed within
the next few months. Subject to the approvals, year round oil production
is expected in 2006, with first gas production from Lunskoye in
2006. First LNG delivery will be scheduled according to customer
requirements, but is currently planned for 2007.
For more information see http://www.omk.ru/.
Posted by Richard Price,
Editor Pipeline Magazine
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