Metal Bulletin Research Strategic Outlook for the OCTG Heat Treatment 2 | Page 7

A Strategic Outlook for the OCTG Heat Treatment, Threading, Coupling and Premium Connection Sectors out to 2020 2. Latin America Threader's capacities Latin Figure 41: Threader’s capacities in Latin Americain(000America (000 tonnes) tonnes) 500 Tecnioriente, Colombia PWR Mission Ind Mec, Brazil Metal Mecanica LES, Venezuela 400 Vivolca, Venezuela Grant Prideco/Tube Alloy, Venezuela Baker Hughes, Venezuela 300 Gulf Engineering Services, Trinidad IAL Engineering Services, Trinidad Sertecpet S.A., Ecuador 200 Weatherford Colombia, Colombia Lupatech, Brazil Dril-Quip Do Brasil, Brazil 100 B&S Oil Tools, Brazil FARSUR Servicios, Bolivia Moto mecanica, Argentina 0 Argentina Brazil Venezuela Trinidad and Colombia Tobago Ecuador Bolivia Torneria El Condor, Argentina Martin Ricardo Breerton, Argentina Vallourec & Mannesmann , Brazil Source: MBR Source: MBR Argentina’s dominant position in the line-up is driven by Moto Mecanica, which is in fact a large swing producer having excess threading and production capacity compared with the local market. Argentina Argentina has operated around 60-80 rigs consuming 200,000 tpy of OCTG for the last few years . The key companies providing OCTG and/or premium threading services to the industry are Martin Ricardo Breerton (five lathes), Torneria El Condor (12 lathes), Moto Mecanica (360 lathes) and Weatherford. MBR has been unable to verify Weatherford’s facilities capacity and our estimate may therefore be somewhat off-base. However, based on that estimate, we place total threading capacity in Argentina in 2011 at about 450,000 tpy – far above local market requirements, even including the Tenaris capacity. In terms of licences, Argentine facilities were predominantly licensed to Tenaris Hydril, as most of those are acting as premium threading facilities for the global group. We estimate the independents were able to achieve an average threading capacity utilisation of 62%, with 30% of output threaded being API and the remaining 70% premium products. Brazil We estimate that Brazilian consumption of OCTG products doubled from 252,000 tpy in 2005 to 527,000 tpy in 2008. After flattening in 2009/10, we estimate that it reached 667,000 tonnes in 2011. A significant increase in drilling from around 30 rigs to more than 70 in 2008, especially offshore, has been the primary reason for the increase, and that rose to over 80 by 2011. The depth and complexity of the offshore wells is also adding to per-well consumption levels. Around two-thirds of consumption is of seamless tube, most of which is sourced domestically. Welded demand has also picked up, however, but to a lesser extent as this is primarily used onshore. The majority of the increase in output has been met by domestic producers. The players on the OCTG and/or premium threading market are: Vallourec & Mannesmann (10 lathes), B&S Oil Tools (16 lathes), Dril-Quip Do Brasil (12 lathes), Lupatech (16 lathes), PWR Mission Ind Mec (five lathes), Engepetrol, FMC Technologies do Brasil, Vetco Gray Óleo & Gás and Weatherford Industria & Comercio. During the research process MBR was unable to verify the facilities and capacity of the last four 74 See www.metalbulletinresearch.com for more information