Demand for protective coatings in the European Union has been weakened by the downturn in EU manufacturing due to the euro crisis. But there is a protective coatings segment—coatings for oil and gas pipeline—further east in Russia and the rest of the former Soviet Union (SFU) that is buoyant at the moment. The need for piped natural gas from Russia, which account for a large share of gas consumption in the EU has been declining in Western Europe due to its economic difficulties. But new steel pipelines are still being built across Russia into the EU in anticipation of a owing long-term requirement for gas.
The two strings of the Nord Stream pipeline with a capacity to transport 55 billion cubic meters of Russian via the Baltic Sea has just been inaugurated. But already the consortium behind the project is negotiating the construction of a third and fourth string, one of which will be used to transport gas direct to the UK. Furthermore, China is seeking gas supplies from Russia and from the Central Asian Republic like Kazakhstan and Uzbekistan. This will necessitate the construction of more gas pipelines.
“Another attraction of the Russia market is that it needs to renew parts of its vast pipeline network, some of which are over 40 years old,” explained Henry Tausch, senior vice president for Europe at U.S.-based Bredero Shaw, the world’s leading pipeline coater, which formulates its own coatings. Also, sometime probably in the next 3 -10 years Russia will need pipelines to transport oil and gas from reservoirs in the Artic.”
Russia alone is estimated to account for more than 20% of 400,000 tons of global demand for pipeline coatings materials. Gas output from Russia and the remainder of the FSU amounts to 40% of the world’s total.
“Average growth in demand for oil and gas pipeline coatings is approximately 5-7% at the moment with the driving force coming from pipeline projects,” said Noru Tsalic, a consultant at Applied Market Information (AMI), a market research company in Bristol, England.
Some observers believe that the growth rate is even higher because of the amounts of coatings required for the maintenance and upgrading of Russia’s extensive network of gas and oil steel pipelines.
Gazprom, the country’s major gas producer, has a network of approximately 170,000 kilometers of gas transmission systems and Transneft, which is responsible for oil distribution, has approximately 50,000 km of pipelines. The Russian government wants a more efficient gas transport system to reduce costs by increasing gas flows.
“The demand for coatings for repair and rehabilitation purposes is probably pushing the growth rate into double digit figures,” said Alexey Khomich, AkzoNobel’s Russian sales manager for protective coatings.
Pipeline coatings suppliers to the Russian market are mostly foreign multinationals with experience of the global oil and gas industry.
“There are around 4-6 major pipeline manufacturers in Russia but they use coatings made by Western companies either in Russia or imported,” said Khomich.
Also, a large proportion of pipes are exported into Russia by Western European pipe makers who develop their own coatings formulations or are supplied by coatings producers. In addition there are international specialist coaters operating in Russia who apply their own formulated coatings to pipes, often at the location of the pipeline. Hempel of Denmark, 3M Corp. and PPG Industries are among multinational pipeline coatings producers active in Russia while coatings raw material suppliers include LyondellBasell Industries, Dow Chemical and Bayer MaterialScience.
Among the coaters Bredero Shaw has been expanding in Russia through a JV with a Russian offshore pipeline contractor with the opening of a concrete coating pipeline facility at Arkhangelsk in the northwest of the country.
Jotun of Norway, which is already a leader in the pipeline coatings market in the Middle East with a 30% share, has just started constructing a factory at Fedorovsky Industrial Park in Leningrad Region for liquid and powder coatings. The plant, which is scheduled to be opened in early 2014 will provide a platform for Jotun to make inroads into the Russian pipeline sector.
“We expect sales to grow for powder coatings applications (in Russia), particularly in the area of pipe coatings,” said Stein Petter Lunde, divisional vice-president, Jotun Paints (Europe).
Jotun has adopted a strategy of being a single-stop source of powder and liquid coatings for all types of pipeline requirements, including new projects and maintenance.
AkzoNobel is aiming to add to its portfolio of pipeline coatings a comprehensive range of liquid paints for the Russian market, in which it is already a provider of powder coatings.
“We are developing or optimizing for Russian approval a number of products like solvent-free polyurethanes which give the right thickness for pipeline coatings,” said Matt Fletcher, AkzoNobel’s European tank linings manager.
Russian companies are being encouraged by Gazprom and Transneft to develop new pipeline coating technologies. Gazprom has a collaboration agreement with Russian Corp. of Nanotechnologies (Rusano) for the development of metallized protective coatings for pipelines. The Russian pipelines industry needs coatings which have proved themselves in extreme weather conditions to be resistant to corrosion and temperatures as low as -60˚ C and to provide thermal insulation, flow enhancement and fire protection.
The oil and gas sector like much of the industry elsewhere in the world is, however, conservative about technological change. So it continues to rely mainly on standard coatings systems like fusion-bonded epoxy (FBE), 3 layer polyethylene and polypropylene and multilayer foam coats. The priority is improvements in application and quality control, particularly through the supply chain from the pipeline factory, transportation, storage and installation. Many pipeline failures have been blamed on mechanical damage of coatings before or during installation.
“We see the need to provide mobile coating solutions for large strategic future onshore and offshore pipelines in the Far East of Russia that are not currently serviced, “ said Tausch. “ Costs of pipe haul from eastern to western Russia are (also) prohibitively expensive.”
A drawback of the Russian market is the lengthy procedure for the testing and approval of pipeline coatings by specifiers. To enter a high volume low margin sector, entrants into the Russian market need to be prepared to invest relatively heavily in product development and qualification.