5 Sep 2019 10:53

ChelPipe aims to boost exports, incl. large-diameter pipes, at higher prices than in Russia

MOSCOW. Sept 5 (Interfax) - ChelPipe Group plans to increase exports of tubular products, including large-diameter pipes (LDP), at higher prices than it can get on the Russian market.

"The Group can get higher prices for certain types of its products, including LDP, from export sales than from sales in Russia," ChelPipe said in a prospectus for its $300 million debut Eurobond offering. "The Group therefore intends to increase the share of LDP sales, including in Africa and CIS countries, in order to improve the sales margin," the company said.

Most of the global demand for LDP is currently coming from the CIS and Asia. "ChelPipe feels confident to participate in these projects, taking advantage of low transport costs on shipments to Asia thanks to a favorable geographical position," the group said.

ChelPipe plans to increase the share of export sales by participating in the Turkmenistan-Afghanistan-Pakistan-India (TAPI) pipeline project and the Saryarka gas pipeline project in Kazakhstan.

The group has capacity to produce 1.65 million tonnes of LDP per year, or 825,000 tonnes in six months. In the first half of 2019, ChelPipe produced 399,000 tonnes of LDP, so it utilized less than half of its LDP production capacity.

The main customers for LDP are oil and gas companies. In Russia, the biggest customers are Gazprom and Transneft . The LDP market is very volatile due to its heavy dependence on demand from new projects in the oil and gas sector. For example, Gazprom's share of ChelPipe's LDP shipments shrank to 8% in the first half of 2019 from 33% a year earlier and 47% in 2016.

The group believes that the key drivers of future growth on the LDP market will be relatively weak investment in oil and gas infrastructure in Russia, as well as new projects in Russia, the CIS, the Middle East and Africa. In Russia, about 75% of oil pipelines and 80% of gas pipelines need to be replaced, as they have been in operation for more than 20 years, ChelPipe estimated. Gazprom and Transneft are in the process of planning and designing pipelines that could require more than 9 million tonnes of LDP in the period from 2019 through 2024.