Metal Bulletin Research Strategic Outlook for the OCTG Heat Treatment 2 | Page 6

A Strategic Outlook for the OCTG Heat Treatment, Threading, Coupling and Premium Connection Sectors out to 2020

2. Latin America
In mid-2011, it started up a new 600,000 tpy seamless facility. Up to 50% will be utilised by the Sumitomo
Group, a co-investor in the project. VSB is expected to fully ramp up towards its full capacity by the end
of 2012, although this could be pushed back. It will make 6”-20“, predominantly OCTG tubular, of which
up to 80% is initially expected to be exported to Africa, the Middle East and North America, although
will increasingly be sold into the domestic market going forward. Capex was eventually $3.1bn, but this
includes iron ore, steel and finished product manufacturing, and the pipe mill was an estimated $1.6bn.
The site has a capacity of 1m tpy of billet, of which 300,000 tpy will be used by Vallourec in other facilities
and the remaining 700,000 tpy to make 600,000 tpy of pipe. Threading lines deliver a total threading
capacity of 450,000 tpy, while Q&T and normalisation lines add 300,000 tpy of heat treatment capacity.
The company has the technical capability to produce about 400,000 units of couplings. Vallourec has a
number of repair and logistics facilities in Brazil.

Apolo Tubulars
Brazilian Apolo Tubular (part owned by US Steel) has 120,000 tpy of tubular capacity. We estimate that
OCTG output is typically around 50-60% of the total. It can produce ERW tubing and casing from 2 3/8”-8
5/8” up to H40, J55, K55, N80 and P110 at its Lorena plant. It has a total threading capacity of 60,000
tpy through a single threading line. A single Q&T line has 100,000 tpy of heat treatment capacity. MBR
believes the site achieved at least 75% of its threading capacity utilisation in 2011, with 100% of output
being API.

TAVSA
Before 2009, the Puerto Ordaz, Venezuela-located Tubos de Acero de Venezuela SA seamless pipe mill was
controlled by the Tenaris group. However, it was nationalised in 2009, after with operating rates dropped;
it was idled in 2010 and has not been restarted for any length of time since then. The mill has a total
capacity of 80,000 tpy of seamless pipe from 6” to 16“. It has a single threading line with a capacity of
80,000 tpy and 30,00 tpy of heat treatment.

2.3 Independent Threaders
Independent threaders as well as service and repair facilities of the major OCTG producers and service
groups are located in the primary oil and gas regions of Brazil, Venezuela, Trinidad & Tobago and Columbia.
Presence in other countries is typically limited to a single service company serving a few projects in the
area on a long-term contract basis.

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