American Market

The total number of drilling rigs in the U.S. increased from 1,700 to 2,007 in 2011. Due to the oversupply of natural gas in North America, with a minimum price of U.S.$2.84 per 1 MMBtu achieved in November 2011 and an average price for the year of U.S.$ 4.00 per 1 MMBtu. As a result, the number of gas rigs fell by 12%, from 919 units in January to 809 units in December 2011. However, high oil prices (U.S. $95 per barrel on average in the year) triggered an increase in the number of oil rigs by 56% to 1,193 units, and their number exceeded the number of gas rigs for the first time in several years. At the end of the year, the U.S. rig count was 40% for gas and 59% for oil with 1% consisting of mixed units. The largest share of drilling rigs is made up of rigs for horizontal and directional drilling, which are widespread in the U.S. At the end of 2011 their share was 69%.

Demand for pipe in the U.S. from oil and gas companies continued to grow in 2011, especially in the segment of line pipe required to transport extracted hydrocarbons to refining and storage sites. As a result, the market for line pipe in the U.S. grew by 21%, reaching 3.8 million tonnes, and the OCTG market increasing to 6 million tonnes, a 20% increase over 2010. The volume of OCTG stockpiles fell from 5 months to 4 months. The result of the growth in demand for hydrocarbon transport infrastructure has increased TMK’s line pipe sales in the U.S. nearly twofold.

TMK IPSCO continues to strengthen its presence in the Canadian market, whose volume of OCTG in 2011 totaled about 1.2 million tonnes, showing 11% growth in comparison to 2010. Despite the fact that the number of drilling rigs in Canada decreased by 25% in 2011 from 564 to 429 units, production growth in the Bakken oilfield in Saskatchewan, as well as development of the oil sands in Alberta, have stimulated sales of welded OCTG production at TMK IPSCO, which has doubled to reach 87 thousand tonnes. As a large oil-producing region, Latin America is also of considerable interest when it comes to sales of the Company’s products. The number of drilling rigs in the region increased in 2011 from 403 in January to 438 in December. TMK continues to strengthen its position in this region, with the first shipments of pipe with ULTRA Premium Connections being made to Peru, and Brazil signing partnership agreements to develop solutions for non-standard types of drilling.

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