HIGH-TECH DIMENSIONS OF ENERGY Piotr Galitzine Chairman, TMK IPSCO USRBC Annual Meeting October 21,...
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Transcript of HIGH-TECH DIMENSIONS OF ENERGY Piotr Galitzine Chairman, TMK IPSCO USRBC Annual Meeting October 21,...
HIGH-TECH DIMENSIONS OF ENERGY
Piotr GalitzineChairman, TMK IPSCO
USRBC Annual Meeting
October 21, 2010
2
TMK Global Strength
o 22 production sites
o 46,000 employees
o 6.4M tons of pipe-making capacity
o ~ $5 billion annual revenue
3
3
The United States and Russia are the global leaders in oil and gas drilling.
TMK’s product mix is geared to meet the needs of the energy industry. Line Pipe
32%
OCTG38%
Industrial30%
Energy
70%
TMK’s strategic positioning made it the steel tubular industry leader in 2009, selling over 3 million tons in a down market.
0
1,000
2,000
3,000
4,000
5,000
6,000
2007 2008 2009 Sep 09 - Aug 10 Aug-10
Sch
lum
berg
er R
ig C
ount
United States Russia CIS (Excl Russia)
Latin America Asia Pacific Middle East
Canada Africa Europe
53%47%
55%55% 50%
TMK Uniquely Positioned to be the Leading Supplier of Energy Tubulars
4
Top 5 States = 76% of Rig
Count
TMK IPSCO Poised for Growth
Today drilling is centered on the
shale plays which are believed to
contain as much as a third of the
United States’ technically
recoverable gas resources.
Source: EIA Modern Shale Gas Primer, April 2009
Smith Technologies
U.S. Rig Count
TX
LA
OKNDPA
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
2007 Avg 2008 Avg 2009 Avg YTD Aug-10 Avg
5
Increasing Rig Productivity
22%
31%
63%
49%
19,500
20,000
20,500
21,000
21,500
22,000
22,500
23,000
500 1,000 1,500 2,000
U.S. Natural Gas Rig Count
U.S
. N
atu
ral
Gas
Mar
kete
d P
rod
uct
ion
(i
n b
cf)
2007
2008
2009
2010EDriven by technological advances in horizontal drilling and hydraulic fracturing, the natural gas industry has become more efficient—producing more natural gas using fewer rigs.
Source: EIA Short-Term Energy Outlook, Smith Technologies
Today’s Energy Environment New Market Dynamics
Since no increase in natural gas consumption is part of the Short-Term Energy Outlook, the natural gas rig count may never return to 2007 – 2008 levels.
End of Period Natural Gas Inventories
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
in b
illi
on
cu
bic
fee
t
5 Yr Min 5 Yr Avg 5 Yr Max 2010F 2011F
6Source: EIA Short Term Energy Outlook, Credit Suisse
The industry has traditionally viewed $5 to $6 as the economic drilling price of gas, but a recent Credit Suisse study estimates
surprisingly low break-even costs for the major shales.
Today’s Energy Environment Lower Break-even Costs Encouraging Drilling
Lower break-even costs will allow the higher rig count to continue despite lower natural gas price forecasts.
Henry Hub Spot Price
2
4
6
8
10
12
14
Jan 2006 Jan 2007 Jan 2008 Jan 2009 Jan 2010 Jan 2011
Actual Sep STEO
Aug STEO Jul STEO
dollars per MMBtu
8
7
Aquifer
¼ mile radius
5,0
00
– 1
0,0
00
ft
8,000 – 12,000 ft
Multiple fraczones
ULTRA - SF
Hydrofracturing:3,000 psi/5,000 psi/25,000 psi
Frequency:10X/25X
Hydrofracking
8
Steam out
Oil In
Two Staged Pairs(Initial)
Two Staged Pairs(final)
With Wedge Well
SAGD Pair (side view)
Advances in Steam Assisted Gravity Drained (SAGD) Wells
(e.g., Cenovus Energy Inc., Calgary)
Wedge Wells
9
Oil In
Slot-Sawing: Another approach to increasing flow pathwaysin the zone of hydrogen recovery
Cutting Cable
Slit Area
10
U.S. Rig Targets by Year
1,416 1,500
797959
310400
282
468
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
2007 Avg 2008 Avg 2009 Avg YTD Aug-10 Avg
Gas Oil Other
U.S. Oil Rig Count by State
3765
50
82 94 99107 116 123
136136
0
100
200
300
400
500
600
2007 Avg 2008 Avg 2009 Avg Jan-10 Feb-10 Mar-10 Apr-10 May-10 Jun-10 Jul-10 Aug-10
Source: Smith Technologies Rig Count
Today’s Energy Environment Oil Driving Growth in Rig Count
32%
26%
21%18%
TX
ND
KSOK
NMTop 5
States = 83% of oil rig count
Both the oil and gas rig counts have rebounded in 2010, but on the back of high crude oil prices, the oil rig count has grown to levels unseen since 1991.
The technologies pioneered in the gas shales have been used to unlock the oil shales. The Bakken shale of North Dakota has a 96% horizontal rig count.
11Source: Company estimates
Competitors continue to announce tubular and finishing capacity additions over the next two years. By the end of 2012, North America will potentially have enough capacity to support 2,400 rigs.
New Challenges North American Capacity Increasing
12
Henry Hub Monthly Average Comparison2006 - 2011F
$0
$2
$4
$6
$8
$10
$12
$14
2006 2007 2008 2009 2010F 2011F
$ p
er M
MB
tu
WTI Crude Oil Monthly Average Comparison2006 - 2011F
$0
$20
$40
$60
$80
$100
$120
$140
$160
2006 2007 2008 2009 2010F 2011F
$ p
er b
arre
l
Source: EIA Short-Term Energy Outlook, September 2010
The EIA has held the crude oil and natural gas price forecasts in the same range as 2010.
2011 Early Outlook Commodity Prices Resembling 2010
Oil prices remain stronger than recent years while natural gas prices are lower due to the large supply of accessible shale gas.
15
13Source: New York Times, EIA
2011 Early Outlook Canadian Oil Sands Gaining Momentum
U.S. Top 10 Sources of Crude Oil Imports - 2009(in thousands of barrels per day)
0 200 400 600 800 1,000 1,200 1,400 1,600 1,800 2,000
Canada
Mexico
Saudi Arabia
Venezuela
Nigeria
Angola
Iraq
Brazil
Algeria
Columbia
Oil Sands21%
12%
11%
3%
3%
Today Canada is the source of over 20% of U.S. crude oil imports; it’s estimated that half of Canadian imports come from the oil sands. The IHS Cambridge Energy Research Associates project that the oil sands will account for 36% of U.S. oil imports by the year 2030.
Today, four Latin American
countries supply another 30% of U.S. crude oil
imports. . .
14
TMK IPSCO has a demonstrated ability to engineer customized solutions allowing our customers to access new markets like the shale plays. Our team of technical experts is continually working to provide the best value in pipe and premium connections to the energy industry as it evolves.
TMK IPSCO’s 2011 Outlook Innovative Solutions Driving Growth
Barnett Haynesville Woodford Marcellus Fayetteville
The shale drilling "training ground"
The deepest, hottest, highest pressure shale
Aggressive drilling, high productivity
The most expansive shale
Currently the 2nd most productive
shale
API ULTRA-SF ULTRA-FJ ULTRA-FJ ULTRA-SFULTRA-DQX ULTRA-DQX
Production API L80 API P110 API P110 API P110 API P110casing grade API P110 HC-P110 HC-P110 HC-P110 HC-P110
CYS 100
Casing O.D. and 4 1/2" 11.6# 4 1/2" 15.1# 4 1/2" 15.1# 5 1/2" 17.0# 5 1/2" 17.0#thickness 5 1/2" 17.0# 5" 23.2# 5" 23.2# 5 1/2" 20.0# 5 1/2" 20.0#
5 1/2" 23.0#
Connection
15
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
'95 '09
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
'95 '09
Coal
Nat GasPetroleum
RenewablesNuclear
48%
22%
22%
18%
The EIA’s Annual Energy Outlook predicts that by the year 2035, coal will still comprise 22% of U.S. energy consumption while renewables grow from 7 to 11%.
Sources: EIA May 2010 Monthly Energy Review, Annual Energy Outlook 2010
Natural gas is the cleanest-burning fossil fuel, emitting half the pollutants of coal. Given the current political and economic climate, there is much incentive for increased use of natural gas as the “bridge fuel.”
Electric Power Consumption
in trillion Btu
CO2 Emissions - Electric Power
in millions of metric tons
11%
1%
Coal22%
Liquids34%
Nuclear8%
Natural Gas22%
Renewables11%Biofuels
3%
TMK IPSCO’s Long-term Prospects Natural Gas – The Key to a Greener Future
TMK IPSCO:Committed to Grow with the Energy Industry