Corrosion Resistant Alloys in the Oil & Gas Industry

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1 Benedikt Blitz, Senior Market Analyst SMR Steel & Metals Market Research, Austria Wolfgang Lipp Managing Director SMI Steel Market Intelligence GmbH Corrosion Resistant Alloys in the Oil & Gas Industry Source: Baker Hughes Source: SBO Source: Butting Source: FMC Technologies

2 World Primary Energy Demand Oil & Gas is still expected to account for around 50 % of the world energy demand by Production of oil and especially gas will continuously grow until then. Mtoe 18,000 16,000 14,000 12,000 10,000 8,000 6,000 4,000 Other Renewables Bioenergy Hydro Nuclear Coal Gas 2,000 Oil Share Oil 36% 32% 31% 30% 27% Share Gas 21% 22% 21% 22% 24% Share Oil & Gas 57% 54% 53% 52% 51% Source: International Energy Agency, World Energy Outlook 2012, Energy trends to 2035, New Policies Scenario

3 Million barrels/day Index based on 2005 Oil Production by Type Long Term Outlook The share of deepwater production will double (from 4 to 9 %). Also onshore production (incl. shale) is growing Deepwater Shallow Water Onshore Onshore Shallow Water Deepwater Source: International Energy Agency, World Energy Outlook 2012

4 Corrosiveness, Temperature, Pressure Why is the share of CRAs (stainless steel & nickel alloys) increasing? The era of easy accessible oil & gas has ended! Increasing offshore production Rapid growth of ultra-deepwater production Increasingly severe operating conditions (higher pressure, higher temperature, higher corrosion) Boosting technologies to increase brownfield production Titanium Ni Alloys 28Cr (Alloy 28) Superduplex (25 Cr) Duplex (22 Cr) CRA demand is driven by the production/reservoir conditions (sorted by importance): 1. Corrosiveness (H 2 S, CO 2, Chloride) 2. Temperature 3. Pressure There is no alternative to CRAs! 300 series austenitic 13Cr, martensitic Alloy Steel Carbon Steel

5 Nickel alloys have a low share in tonnage but significantly more in value. With alloy steel it is the other way round. Steel Demand in the Oil & Gas Industry by Steel Type in 2012* - Tonnage vs. Value 80% 70% 60% 50% 40% 30% 20% 10% 0% Alloy Steel Stainless Steel Nickel Alloy - 4 -

6 Product Forms Used in the Oil & Gas Industry by Steel Type (total ~1.4 million tpy excl. Carbon Steel) Alloy Steel (496 kt) Stainless Steel (848 kt) Nickel Alloy (56 kt) Seamless Tube & Pipe Welded Tube & Pipe Forged Products Rolled Long Products Flat Products Seamless Tube & Pipe Welded Tube & Pipe Forged Products Rolled Long Products Flat Products Seamless Tube & Pipe Welded Tube & Pipe Forged Products Rolled Long Products Flat Products - 5 -

7 Steel Grades Used in the Oil & Gas Industry by Steel Type (total ~1.4 million tpy excl. Carbon Steel) Alloy Steel (496 kt) Stainless Steel (848 kt) Nickel Alloy (56 kt) 4130/ H 300 Series 13Cr / F22 Duplex Non-Mag /4340 Others Martensitic Other 925 Others - 6 -

8 Application Overview Source: GENESIS Oil & Gas - 7 -

9 Examples for CRA Applications: Drilling & Completion Source: VAM Drilling Drill Collars, Heavy Weight Drill Pipes Source: VAM Drilling Source: Rimor Stabilizers Source: Baker Hughes Source: SBO Bottom Hole Assembly incl. Drill Bit, Mud Motor, MWD/LWD, Non-Magnetic Drill Collars Downhole Tools incl. Packers, Screens, Subsurface Safety Valves, Liner Hangers - 8 -

10 Examples for CRA Applications: Wellhead Parts Tubing Hanger Source: FMC Source: SMI Manufacturing Tubing Head Source: SMI Manufacturing Casing Head Source: FMC Source: FMC Source: Cameron High Pressure Housing Seal Casing Hanger - 9 -

11 Examples for CRA Applications: BOP Parts Source: Ringmill Body Source: Shanghai Qimiao Flange Source: SMI Manufacturing Ram Operating Piston Source: Fomas Group Annular BOP mono-block

12 Examples for CRA Applications: Tree and Manifold Parts Source: FMC Master Valve Block Wing Valve Block Tree Cap Source: SMI Manufacturing Manifold Block Source: FMC Technologies Subsea Trees Source: Cameron Manifold

13 Examples for Applications: Risers, Flowlines, Umbilicals Source: Aker FMC Solutions Technologies Drilling Riser Source: Oceaneering Cameron Flying Leads Umbilicals Source: Aker Solutions Source: Total Source: Butting Flowlines with CRA cladding Flexible Risers Source: Subsea Riser Products Riser Stress Joint

14 Examples for Applications: Flanges & Connectors Source: FMC Technologies Source: FES International Collet Connector Source: Source; Cameron Oceaneering Stab Connectors Source: Radoil Stab Plates Source: Aker Solutions Source: Ameriforge Flowlines with CRA cladding Clamp Connector Source: Hunting Source: Subsea Riser Products Hydraulic Couplings

15 Examples for Applications: Control Units Source: Oceaneering Source: Proserv Well Control Panel Source: Parker Umbilical Termination Source: KME BOP Control System Source: Rimor Subsea Control Module Control Lines

16 The Oil & Gas Materials Supply Chain Example downhole hardware in Houston Steel Mills Distributors Major Equipment Producer Independent Big Machine Shops Independent Small Machine Shops Oil Company

17 The Oil & Gas Materials Supply Chain Example non magnetic drill collars & downhole hardware Stock Points best worst Raw Materials Meltshop, Remelting & Pre-forming, Testing Forging, Rough Machining of Component, Testing Heat Treatment, Final Machining, Test Assembly of Component, Testing Field Installation, Testing

18 Index based on 2007 Stainless steel and nickel alloys demand for oil & gas applications will grow faster than the alloy steel demand. Stainless steel and nickel alloys are more related to offshore drilling. Forecast: Steel Demand in the Oil & Gas Industry by Steel Type ( ) 150 Historic Forecast Total Alloy Steel Total Stainless Steel Total Nickel Alloys Total meters drilled offshore Total meters drilled onshore f 2014f 2015f 2016f 2017f 2018f

19 Index based on 2007 After a temporary slowdown of projects, a lot of flowline projects are in the pipeline from 2015 to Especially the demand for clad pipes will grow fast which could result in long delivery times. Forecast: Seamless and Welded Tube & Pipe (stainless steel and nickel alloys, ) Seamless Welded Clad Total meters drilled offshore Km of rigid flowlines & SCR Historic Forecast f 2014f 2015f 2016f 2017f 2018f

20 This must not happen again! High performance materials incl. CRAs improve the safety of offshore production!

21 If you have questions please contact: SMI - Steel Market Intelligence GmbH Kohlplatz 7, 6600 Reutte, Austria Tel Fax Wolfgang Lipp, Managing Director w.lipp@steel-intelligence.com THANK YOU!