North American Market

Active development of offshore fields in 2011–2012 resulted in a considerable decrease in the US natural gas prices. For the major part of 2012 gas prices per 1 mmbtu remained below US$3, showing a slight increase in Q4 2012.

This trend started in 2011 followed by a move in drilling activity, represented by increasing share of oil rigs from 55% at the end of 2011 to 76% in late 2012.

However, oil drilling did not fully offset a decline in gas drilling, the overall number of rigs went down by 11% or 219 rigs from 2,003 rigs in December 2011 to 1,784 rigs in December 2012.

The growing share of oil wells results in a declining demand for seamless pipes and premium connections widely used in gas field developments. Sales of welded pipes are therefore rising while offering lower margins that result from a lower technology input and strong competitive pressure from Asian producers.

However, development of offshore and unconventional fields still harbours large potential in North America where horizontal and directional drilling continue to prevail.

In 2012 the US steel pipe market grew by 11% to 20 million tonnes, imports increased by 23%, while shipments of US pipe producers showed only a 4% growth. OCTG shipments in the USA went up by 14% to 7 million tonnes and OCTG imports rose by 23% reaching 51% of the total U.S. OCTG market, local producers added only 6% to their output. North America remains one of the most promising markets as it demonstrates the highest demand for tubular products, including oil and gas pipes, and outperforms other regions in drilling activity.

As a major producer of premium connections in North America, we continue to focus on highmargin premium products, and annually increase sales of ULTRA connections.

TMK IPSCO expanded its presence in Canada and opened in March 2013 a new pipe threading and service facility in Edmonton to produce ULTRA premium connections

The new plant is located in close proximity to Canadian oil sands where premium connections are highly required for hydrocarbon production. We are therefore looking for further expansion of our presence in Canada.

Besides, TMK IPSCO is actively strengthening its market position in Latin America – the company established contacts with major distributors of tubular products and increased shipments to the region in 2012. In addition, line pipes produced by TMK IPSCO were certified by certain oil companies in Latin America.

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