Capital expenditure

Throughout the year, we continued our strategic capital expenditure programme, which focused principally on increasing our share of high value-added products, enhancing our production capacity for premium products, and reducing unit costs.

20122011ChangeChange
in million dollarsin million dollarsin %
Russia3472489940 %
America95643148 %
Europe451431223 %
CAPITAL EXPENDITURE48732616149 %
20122011ChangeChange
in million dollarsin million dollarsin %
Russia3472489940 %
America95643148 %
Europe451431223 %
CAPITAL EXPENDITURE48732616149 %

The majority of the strategic capital projects are undertaken in the Russian division. Our key projects are:

  • ongoing replacement of the open hearth furnaces with EAF steelmaking facilities at TAGMET in order to reduce steelmaking costs and increase an annual billet-production capacity. Commissioning is planned in 2013;
  • ongoing construction of a new Fine Quality Mill (“FQM”) at STZ. Commissioning is planned in 2014.

At the same time, we implement several less expensive projects which also help us to maintain our production flexibility, efficiency and to sustain competitive advantage:

  • installation of additional non-destructive testing instrumentation, the new hydro-press and pipe-threading facilities at SinTZ as part of their programme to improve the quality of OCTG. The project is planned to be completed in 2013;
  • construction of the mill for production of stainless steel seamless pipe measuring up to 30 meters in length at TMKINOX. The project completion is scheduled at the end of 2013;
  • construction of the new line for coating application at TMK Oilfield Services. The project is planned to be completed in 2013.

During 2012, we completed some projects including:

  • modernisation of the longitudinally welded large diameter pipe mill at VTZ. It has significantly enhanced our production capacity for high grade welded pipe;
  • modernisation of a hot-rolled mill at VTZ was completed in late 2012. It has significantly enhanced production capacity for hotrolled pipe at VTZ and increased the quality of pipe produced;
  • a new line to produce premium threaded casing was constructed at our Orsk Machine-Building Plant. The line was commissioned in the third quarter of 2012.

The following projects will enable TMK IPSCO to strengthen its position in the segment of premium connections for horizontal and directional drilling in North America:

  • launch of the research and development center in Houston, Texas in October 2012. The new state-of-the-art R&D center serves as the heart of our company’s innovation initiatives – new product design and development, experimental and validation testing, and advanced metallurgical research;
  • consolidation of threading operations at the production facility located in Odessa, TX is underway. The project completion is scheduled for 2013;
  • development of a new pipe threading and service facility in Edmonton, Canada. The state-of-the-art production equipment at the facility will thread a full range of ULTRA™ Premium connections. The facility commissioning is planned in early 2013.

At the same time, TMK IPSCO continues to improve cost efficiency and increase production capacities. The following projects, among others, serve this purpose:

  • installation of a slitting line in Wilder, KY. The line was commissioned in the second half of 2012;
  • launch of a programme to expand finishing capacities at Koppel, PA, including heat treatment and, nondestructive testing. The project completion is scheduled for 2014.

During 2012, TMK-RESITA completed renovation of gas cleaner facilities as part of its environmental protection programme.

TMK-ARTROM launched a programme to increase the share of high value added product sales. Under this project, construction of a new pipe finishing shop was completed in 2012.

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