Regina鈥� EVRAZ鈥檚 Regina steelworks is an important producer of steel pipe, not only for major pipeline projects, but for smaller pipe used every day in well completions and pipelines.
On Dec. 14 EVRAZ vice president of oil country tubular goods sales and business development Kelly Smith responded to our email inquiries about EVRAZ鈥檚 role in the small-pipe industry.
Pipeline News:EVRAZ is well known for its Regina steel mill and large-diameter pipe used in mainline pipeline construction. What might not be so well known is its offerings in small-diameter pipe, also known as oil country tubular goods. Can you please explain what is produced in this regard in Regina? How many people work there?
Kelly Smith:EVRAZ employs approximately 1,100 people, and has the ability to produce 2-3/8鈥�, 2-7/8鈥� and 3-陆鈥� tubing blanks. Additionally, our 24鈥� ERW mill can produce 9-5/8鈥�, 10-戮鈥�, 11-戮鈥�, 13-3/8鈥� and 16鈥� casing blanks at our Regina, Saskatchewan, facility. The blanks are then sent on to our Calgary or Red Deer facilities in Alberta for finishing.聽
P.N.: Do you make production tubing, casing or drill pipe, or is it primarily pipeline pipe?
Smith:EVRAZ manufactures casing and tubing used in drilling applications, as well as line pipe to transport oil and gas from the wellhead to processing facilities and large-diameter transmission lines.
P.N.: How does this tie into your OCTG operations in Calgary, Camrose and Red Deer?
Smith:EVRAZ Regina operates an electric arc furnace that transforms recycled scrap into high-strength steel plate and coil. The majority of Regina鈥檚 steel is converted into energy tubular products on site, or at facilities located in Calgary, Camrose and Red Deer, Alberta. We have the only OCTG heat treat line, and are the largest producer of ERW OCTG and ERW line pipe in Western Canada. In addition, Red Deer and Calgary manufacture our EVRlock QB2 premium and QB1-HT semi-premium connections used in downhole applications.
P.N.: Where do these products eventually end up? Is it primarily domestic consumption, or does some go south, and does some go overseas?
Smith:Large diameter spiral, ERW (electric resistance weld) line pipe and OCTG products are supplied to customers throughout Canada and the United States.
P.N.: What has the market been like for your OCTG over the past 18 months?
Smith:The OCTG market has been challenging on various fronts. The drop in oil price has resulted in a 52 per cent drop in wells drilled in Western Canada for 2015 versus 2014 levels. This in turn resulted in significant inventory build-up through 2015 that will extend into 2016. We believe we are the low-cost producer of OCTG and are strategically located to meet our customers鈥� needs with quality products and short lead times.
P.N.: With capital spending by oil companies having tanked over the last year, what has been the impact on EVRAZ?
Smith:Like our competitors in the energy sector, we have been impacted by excessive inventory overhang at distribution centers due to the reduction in the domestic rig count coupled with historically high levels of imports from聽offshore countries. This has led to layoffs for our Canadian steelworkers 鈥� a major reason we have taken such a strong position against unfairly traded imported tubular products. While North American mills have reduced production to adjust to market contingencies, foreign exporters from market- and non-market economies continue to produce despite sluggish demand.
P.N.: EVRAZ has expressed numerous concerns over the years with regards to Chinese-produced pipe, fair trade practices and the like. Can you elaborate on what the issues are here, and the recent ruling on Nov. 27 by the Canada Border Services Agency?
Smith:As our Nov. 27, 2015 press release states, we were pleased with the Canada Border Services Agency (CBSA) findings of preliminary total duty rates between 71 per cent and 396 per cent against exports of certain line pipe from China into Canada, which are now in effect.
鈥淲e applaud the Government of Canada and the CBSA for their diligent analysis and decisions, which will positively impact the Canadian job market while sending a message that illegal dumping and foreign government subsidization will be met with strong action by the Canadian government,鈥� said Conrad Winkler, President and CEO of EVRAZ North America. 鈥淲e actively compete globally with line pipe manufacturers, but foreign companies should not be allowed to dump their product while we reduce Canadian employment to save their subsidized jobs.鈥�
China shipped more welded line pipe to Canada in 2015 than any other country in the world. 鈥淐hina is the definition of a non-market economy, exporting product at prices below its own home market to support its steel industry even as its own internal steel consumption continues to decline,鈥� stated Winkler. 鈥淭his decision underscores the need for strong trade remedy laws and regulations.鈥�
According to Winkler, the company trusts the remainder of the CBSA investigation will further reveal China鈥檚 unfair practices and support the Canadian steel industry.
P.N.: With oil prices less than half what they were for much of 2010-2014, and producers looking to cut every expense they can, how does the imposition of duties between 71 and 396 per cent affect the oil and gas industry?
Smith:See above. This is an ongoing case and we expect final resolution sometime in Q1 2016.
P.N.: What does the future hold for the Regina EVRAZ facility?
Smith:Just as it has for the past 60-plus years, EVRAZ will continue to serve the North American energy sector with quality plate, coil and tubular products. Our recent $200 million investment includes state-of-the-art upgrades in steelmaking including degassing and the ability to make larger steel slab sizes. Additionally, the power and size of the rolling mill will be increased to make thicker, wider steel coils. And the new two-step large diameter pipe mill will enable the production of larger, thicker-wall pipe and increase our annual production capacity of large diameter pipe by over 100,000 tons. We also expect that as inventory overhang burns off in OCTG, total demand will follow more closely with rig counts and oil production.聽
P.N.: Is there anything you would like to add?
Smith:At EVRAZ North America, our absolute priorities are safety and quality. We make our premium engineered products safely and with strict adherence to increasingly stringent industry standards in order to supply our pipeline customers with the highest quality pipe available.
We pioneered large-diameter pipe in North America and are its largest producer. We have long been committed to the ongoing improvement of steel and pipe technology. Our research and development centre is the largest focused on pipe manufacturing in North America, and we budget millions of dollars each year to study and enhance the safety and integrity of steel and steel pipe. Our own eminently qualified team works with numerous other industry and academic institutions on mechanical, collapse, weld and corrosion testing; microstructure analysis; and process simulation.
In addition, EVRAZ high quality pipe is made safely and sustainably in North America from recycled steel to meet North America鈥檚 rigorous environmental regulations. We are also the only company capable of manufacturing 鈥�100 per cent Made in Canada鈥� pipe for energy infrastructure.
