AS A pioneer in seamless pipe manufacturing in Saudi Arabia, The Industrialisation and Energy Services Company’s (Taqa) new subsidiary Jubail Energy Services Company (Jesco) aspires to become a centre of excellence in Jubail’s Industrial City.
With the completion of all necessary agreements, site work for the new complex is under way. Danieli of Italy has been awarded the turn-key engineering, procurement and construction (EPC) contract. Commissioning, start-up and plant operations are anticipated to commence during the second quarter of 2009.
“Our vision is to be a leading manufacturer of high-quality products and a provider of best-in-class services to the industrial and energy sectors,” says Khalil Ibrahim Al Gannas, president and CEO of Jesco, in an interview to OGN.
Pointing out that there are currently no seamless pipe manufacturing facility in the region, Al Gannas, who was formerly president of the National Shipping Company of Saudi Arabia (NSCSA), says Jesco will be the very first seamless pipe mill in this very demanding market.
The proposed plant will produce 400,000 tonnes per annum (tpa).
The plant is designed to produce seamless pipes in sizes varying from 5 3/8 inches to 16 inches in diameter, with varying wall thicknesses and different steel compositions.
Sophisticated heat treatment and pipe finishing facilities will enable the plant to meet requirements of oil and gas customers’ requirements with the built-in ability to test and certify its products in accordance with the latest international standards and specification, says Al Gannas.
Excerpts from the interview:
How has the company progressed since its inception in 2006?
Jubail Energy Services Co (Jesco) was incorporated as a closed public shareholding company in March 2007. Taqa owns 51 per cent and is the promoter of Jesco and the seamless pipe manufacturing in the region. In November 2006 Taqa/Jesco signed a lump sum turn-key (LSTK) contract with Danieli of Italy to build a state of the art seamless pipe manufacturing facility. This contract includes basic and detailed design, site preparation, civil works, equipment manufacturing, erection and commissioning. At the end of September 2008 we were passing 90 per cent progress in this LSTK contract. All the equipment has been shipped to the site and erection activities are ongoing. Jesco has hired key management and technical staff to manage the project and to run the mill. We are now at the end of the EPC stage and in the proximity of stage 2, the plant commissioning and operations.
At this stage we focus on business development and creating awareness of Jesco. Worldwide recruitment process is ongoing and specific training started in order to prepare the staff for operations. Feedstock supply and off take agreements were signed with Duferco of Switzerland.
Manufacturing of seamless pipes is a competitive industry not only for the Middle East region but worldwide, how will Jesco approach the Oil Country Tubular Goods (OCTG) market?
As you know, currently there is no seamless pipe manufacturing facility in the area. Localising seamless pipe (SP) manufacturing capabilities in the Middle East in general and Saudi Arabia in particular is a commercial necessity and a strategic objective. Jesco will be the very first seamless pipe mill in this very demanding market. Jesco will benefit from its state-of-the-art manufacturing facility, best quality of its products and proximity to customers, thus saving freight and shortening delivery time. Our objective is to implement a customer supply chain that would meet the buyer’s expectations at any time and condition.
Do you have any plans for expansion in manufacturing any other type of pipes to meet market demands?
The trend of the OCTG market had been to use more and more sophisticated products as drilling operations expanded to more aggressive and demanding environments. The GCC area is significantly using more premium connections than other markets due to the specific constraints related to directional and horizontal drilling. Also there is an increasing demand for sour services steel grades. Considering that today premium connections represent more than half of OCTG consumption in Jesco’s regional market, we have built a plan to develop, implement and manufacture premium connections, as well as dedicated steel grades for aggressive environments. We’ll continuously look at the market and focus to meet its needs.
We have also introduced the capabilities to produce the 16 inch line pipe used in this region to meet such needs.
What industries other that oil and gas are Jesco targeting?
The OCTG market is the most significant one for the region that Jesco will approach. Nevertheless, we did reserve production capacity for seamless steel pipes to be used in different applications, which are also growing in the regional market, such as the petrochemical industry, mechanical applications and construction industry. The design of Jesco’s plant considered OCTG, line pipes, high temperature services, mechanical and structural pipes as range of products. What Jesco now lacks in other oil and gas service industries, Taqa is complementing.
What export markets will Jesco sell into and what your other plans for development markets/expansion?
Localising seamless pipe manufacturing was a necessity primarily due to the high demand in the region and the need to get pipes faster where needed. Jesco needs to maximise its results by shortening the supply chain to its customers, therefore getting the freight cost saving advantage. Geographically speaking this means that we’ll address primarily the Middle East, North-West and East Africa, which we consider as regional markets, while we’ll target other regions where OCTG market is growing and there is a strategic reason to sell in that market. Don’t forget that Jesco’s sales will benefit from Duferco’s existing commercial network worldwide.
What grades of seamless pipe do Jesco manufacture?
We are able to manufacture carbon steel grades and alloy steel grades up to 10 per cent alloy elements.[PVL] We’ll be able to manufacture OCTG from J 55 up to Q125, including sour services C90 and T95, according to API 5CT , and from Grade B up to X 80 for line pipes, as per API 5L. Jesco can produce steel grades as per other international standards as well. Our published profile and technical catalogue should give additional details.
Who do you target as your future clients?
Considering the location, we’ll target national, independent and major oil companies in the area, as well as EPC customers, while we’ll build a distribution network for smaller quantities in selected markets. Saudi Aramco is one of the main customers we are targeting for our products.
It is well known that selling OCTG pipes to the end-user requires certain certifications and qualifications. What’s the Jesco’s status today in this regard?
As a new manufacturer, Jesco will need to obtain all these certifications and qualifications. First of all, we have established a quality system using ISO 9001-2000 as the guideline. We have finalised our quality manual, while procedures and working instructions development is ongoing. We have retained Lloyd’s in order to certify our quality system. As regards American Petroleum Institute (API), we will apply for API 5CT and API 5L manufacturing licence. For qualification to oil and gas companies we are working with various professionals to ease the qualification of Jesco which we intend to start from day one of operations.
How much interest is Jesco seamless pipe plant getting from its future local customers?
Let me point out not only the interest but the unlimited support and encouragement Jesco is getting from Saudi Aramco. It is well known that Saudi Aramco is the largest seamless pipe buyer in the region. Many of Saudi Aramco’s executives and professionals are closely following the progress of this project and coordination with Saudi Aramco is ongoing.
