July 2010
FOR IMMEDIATE RELEASE

Press Contact:

Anne Meerboth-Maltz
Tel. (312)781-5185
Fax (312) 781-5188
email: ameerboth@mdna.com

Messe Düsseldorf North America
150 North Michigan Avenue
Suite 2920
Chicago, IL 60601

SPECIALIST ARTICLE NO. 2

Valve World Expo 2010:

The pipeline rush is on – valve industry can hope for good business

Messe Düsseldorf will organize Valve World Expo, 7th Biennial Valve World Conference & Exhibition from November 30 – December 2, 2010 in Düsseldorf, Germany. Over 420 exhibitors from 35 nations will display innovative industrial valve and fittings solutions.

The rush for the fossil energy resources, natural gas and crude oil, is in full swing. Numerous gas and oil pipelines are being planned and built worldwide to meet the increasing demand for energy. But it is already questionable whether every pipeline can be supplied with sufficient gas and oil. One thing is for certain, namely that the ever increasing construction of transport pipelines will present the valve industry with big economic opportunities. European manufactures in particular expect to benefit significantly from the major Nord Stream, South Stream and Nabucco projects.

The calculation is simple. Improved living standards the world over will call for a corresponding rise in energy needs. Especially the emerging nations, such as China and India, are therefore increasing consumption. But Western Europe also wants more gas and oil. Experts expect annual worldwide needs to increase from 107,000 terawatt-hours to 160,500 (TWh) by 2030. The forecast is for this figure to double to about 320,000 by 2060.

Fossil energy carriers, which have an 85% share of primary energy consumption, play the leading role and things will not change over the next few decades. Quite the contrary, as oil and gas consumption will continue to rise. For this to happen, the energy infrastructure will have to be vastly improved. New pipelines or liquefied natural gas terminals should keep everything flowing.

There is a need for action in Europe. According to predictions, gas needs will climb from 314 billion cubic metres in 2005 to 509 billion in 2025. At the same time, production is falling in the North Sea gas fields, whose reserves are slowly being exhausted. A dilemma. Europe is therefore now banking on three new pipelines, Nord Stream, South Stream and Nabucco.

Nord Stream is being built to link the natural gas supplier, Russia, with the European Union via the Baltic Sea. Natural gas will be pumped over 1,200 kilometres from Wyborg in Russia to Greifswald in Germany. The Nord Stream completion date is projected for 2011. Initially 27.5 billion cubic metres will be transported before capacity is doubled one year later. Gazprom, the Russian energy company, is the project’s biggest stakeholder with 51%. 20% stakes are held by the two German companies BASF/Wintershall and E.ON Ruhrgas while the Dutch Gasunie has a 9% holding.

South Stream is being planned by Gazprom and the Italian energy group Eni. It will go from Beregovaya on the Black Sea coast, through the Black Sea all the way to Bulgaria, Greece and Italy. Construction is expected to start in 2010 and it will begin pumping gas starting in 2013. The plan is for the yearly gas capacity to start off at 31 billion cubic metres. Later this figure will be raised to 47 billion.

Nabucco is an EU-supported pipeline. Russia, in contrast to the Nord and South Stream projects, is not involved. The Nabucco consortium is made up of companies from Germany, Austria, Hungary, Romania, Bulgaria and Turkey. The pipeline, for which construction is projected to start in 2011, will supply natural gas from the Caspian region to Western Europe. Thirty-one billion cubic metres should be flowing through the 3,300 kilometre long pipeline starting in 2014. Approximately Euro 7.9 billion will be invested in the project – Euro 250 million is being financed by the EU.

Originally, the Nabucco consortium wanted to start detailed planning in as soon as the first half of 2010. Now the investment decision will probably only be made towards the end of 2010. Technological and ecological aspects have to be resolved first of all. The Nabucco consortium is also currently negotiating with potential lenders.

In contrast, the Scandinavian countries, along with Russia and Germany, have already given Nord Stream the go-ahead. Many nations have already approved South Stream. Nabucco is therefore a “maybe” but the valve industry can already look forward to the other pipelines. Nabucco has another, even bigger problem. It is questionable whether enough natural gas will be left over for the pipeline as Russia has signed a natural gas supply agreement with Azerbaijan. Turkmenistan’s natural gas, which Nabucco has its eyes on, flows on the other hand to Russia and, since only recently, via the Trans-Asian pipeline to China.

Should Nabucco not be able to meet its capacities, the EU will be unable to fulfil its objective of becoming less dependent on Russian gas. Russia on the other hand has nothing against remaining the EU’s main supplier. In pursuing its South Stream project, it means Nabucco is facing powerful competition from Russia. Nord Stream and South Stream will additionally enable Russia to achieve its aim of bypassing the Ukraine which acts as a transit country. These two countries have an ongoing conflict in recent years over gas prices and transit fees.

Nord Stream is already “tangible”. Work on Nord Stream began with the “Ostsee-Pipeline-Anbindungs-Leitung” (OPAL – the Baltic Sea Pipeline Link). OPAL will pick up natural gas from Nord Stream in Lubmin, near Greifswald, and then transport it 470 kilometres south to the Czech border. Lucrative contracts are beckoning the valve industry. The pipeline will require a total of about 160 valves with a nominal diameter between DN 150 and DN 1,400. Ball valves will be used and they will be installed underground with a tap extension for usability, explained Olaf Müller, the Divisional Head at the OPAL NEL TRANSPORT GmbH. Valves will be fully welded and are piggable.

“Shut-off valve installations are stipulated every 12 to 18 kilometres for natural gas pipelines,” explained Olaf Müller. Thirty such shut-off stations are planned for the OPAL and they will be telemonitored around the clock in a main control room. The valves can, if necessary, be teleoperated.

Two compressor plants are also planned for the OPAL. “There’ll be a further need for valves aboveground – mainly in diameters of up to 1200.” Valves with higher compression stages of up to 180bar will be installed in the landfall facility – the interface between Offshore Nord Stream und Onshore OPAL/NEL.

Valves for the OPAL project will have the job of shutting down the pipeline, purging, isolating pipeline sections and pipeline branches and ensuring safety at the points in between compression stages. They have to be capable of withstanding temperatures of between minus 20 and plus 80 degrees centigrade. The sealing systems have primarily metallic sealing and secondarily soft sealing.

Contracts to supply the OPAL project with valves went out to tender to companies Europe-wide. “After the tenders were evaluated according to their commercial and technological viability, the contracts were awarded to German manufacturers,” reported Olaf Müller. For example, contracts were given to the Schuck Group. The company will deliver 56“ ball valves ANSI 900. And OPAL has created a first. “Valves of this kind have never been built anywhere in the world,” stated Birgit Schuck, Head of Marketing. Also belonging to the same project is the receiver station in Greifswald, where valves of up to 36“ in the compression stage 220 bar will be fitted. “Fully welded valves in this compression stage and diameter have, as far as we know, never or rarely been fitted.”

Europe however is not the only place where pipelines are being installed in mass. Asia and South America are also currently forging ahead with the construction of transport pipelines and are therefore activating the valve business to an even greater extent, but only basically in pipes with a diameter of 40“. China especially is meeting the needs of its emerging economy by building numerous new pipelines. One recently completed project is the Central Asian pipeline which pumps gas from Turkmenistan via Kazakhstan and Uzbekistan to China. Up to 40 billion cubic metres of gas will be transported yearly through the new pipeline. The WEPP pipeline will be given an additional branch. ASIA Gas will go to the Chinese border where it will be connected to the WEPP.

In India, the National Gas Grid will be built to supply the country’s large cities with gas. It will be fitted with valves of up to 36“ ANSI 600. Major contracts, on the other hand, cannot be expected to come out of Iran over the next two years. This is due to the economic embargo. Energy companies still include Iran on their lists. The Hungarian energy group, Mol, is looking to fill the planned Nabucco pipeline with gas from Iran. According to the group, sooner or later gas will have to be drawn from the country. Mol is therefore already building up its contacts in the technological sector. Another member of the Nabucco consortium, the German RWE energy group, has, up to now, stressed that gas from Iran will not be needed. But the dim chances of receiving fossil energy resources for Nabucco from Turkmenistan may well have led to Mol changing its mind.

The Australian market is also turning out to be an interesting one for the valve industry. Some projects have been completed Down Under using valves of up to 36“. Competition here comes mainly from Asia.

Oil storage and export facilities are in the process of being built for a pipeline project in the United Arab Emirates. The Abu Dhabi Crude Oil Pipeline wants to offer an export alternative to the Strait of Hormuz “bottle neck” for the Habsham oilfield, which is the collection centre for a large proportion of Abu Dhabi’s onshore oil production. The British Rotork group is supplying electrical valve controls for the 370 kilometre pipeline which will transport crude oil to Fujairah on the East Coast of the Emirate. Rotork Fluid Systems has additionally been awarded a contract for gas-oil valves for a new strategic 180 kilometre gas pipeline which is intended to help develop the economy in the Kurdish region in Iraq.

The Swiss based ABB got a contract worth $ 223 million from the Algerian oil and gas company Sonatrach for three gas refineries in Algeria. The project, which is expected to be finished in the first quarter of 2012, includes compressor trains, new measuring technologies for the old gas treatment plant and an integrated control system for the new and old facilities. The compressor trains will serve to increase the gas flow rate in the pipelines.

And what is Russia offering the valve industry? The country is, after all, by far the world’s biggest gas producer with a market share of 20%. “The Russian market has, is in our estimation, collapsed,” said Birgit Schuck from the Schuck Group. Hardly any projects are being realized at the moment, “and when they are, they use Russian produced valves.”

But how long will the pipeline euphoria last?

Oil reserves are coming to an end. The German Federal Institute for Geosciences and Natural Resources (BGR) predicts that half the earth’s extractable oil will have been used up in as soon as 10 to 15 years time. “A successive reduction in oil production can be expected from that time onwards.” According to Philip Watts, Head of the world market leader Royal Dutch/Shell, the world will be using more natural gas than oil starting about 2025. Assuming the production of gas remains at a constant level then one can also assume there will be sufficient oil reserves up until the 2070s.

Therefore, the valve boom within the oil and gas production industries will continue for a few decades. But a stagnation of the boom will occur sooner or later. Regenerative energies are already knocking on the door and it is here that the valve and seals industries will have to look for their long term opportunities.

For further information on visiting or exhibiting at Valve World Expo 2010, contact Messe Düsseldorf North America, 150 North Michigan Avenue, Suite 2920, Chicago, IL 60601. Telephone: (312) 781-5180; Fax: (312) 781-5188; E-mail: info@mdna.com; Visit our web site http://www.mdna.com; Subscribe to our blog http://blog.mdna.com; Follow us on twitter at http://twitter.com/mdnachicago

Corresponding photos for the article can be found at: www.valveworldexpo.com > Presse Service > Press releases (photos are at the end of the article)

# # #