octg n°8 def.qxd

T H E V A L L O U R E C O I L & G A S M A G A Z I N E

# 0 1 - J A N U A R Y 2 0 1 2

VALLOUREC & SUMITOMO TUBOS DO BRASIL

A giant is born

SOLUTIONSAccessories...but essential!

ON THE MARKETIraqi oil & gas: The New Era

THE TECH FILESCorrosion ResistantAlloy for OCTG

edito

Publisher: Vallourec Oil & Gas - 27, avenue du Général Leclerc, 92660 Boulogne Billancourt Cedex- France - Editorial Team: Hassna Belmalek - E-mail: [email protected] - Phone: + 33 1 49 09 35 83 - Fax: + 33 1 49 09 37 13 - Thierry Wolkiewiez - E-mail: [email protected] - Production: Zabriskie.,Paris - Design: LeGrand8, Paris - Photographs: Thierry Truck, Vallourec, Thiago Fernandes, Roberto Stuckert, Victor Lupianez, Tubacex, V&M Middle East, Interbrand, V&M Tube Alloy,Saudi Seamless Pipes Factory, VAM Services, Neuf&9 or as mentioned otherwise - All rights reserved.

w w w. c o n n e c t i o n - m a g . c o mw w w. v a m s e r v i c e s . c o m

Dear Readers,Welcome to the brand new magazine of the Vallourec Oil and Gas division. LastApril, we conducted an online survey to get your feedback about the V&M Reportmagazine. I would like to thank you all for taking the time completing it.

The survey confirmed that our magazine is an effective tool for your business andan important source of information about our products and technologies. Nevertheless,you suggested many possible improvements. That is why we decided to keep theconcept of an Oil and Gas magazine but overhauling its design, structure, its ‘lookand feel’, and contents.

Today, we are proud to launch the first issue of CONNECTION!CONNECTION will be available in a -traditional paper version -and also through aweb-magazine that will offer additional multimedia material. Furthermore, it will becomplemented by an e-newsletter every time that important news so requires.

Talking about web technology, I am pleased to announce that we have just finalizedan application for smartphones that should be very helpful for all VAM users. The“VAM app” is now available both on the App Store for iPhone and on BlackberryApp World. We encourage you to download this app and discover its exclusive toolsand functionalities!

You will see that this first issue of CONNECTION covers very rich corporate newsfor Vallourec, illustrating our strong willingness to develop our activity and to becloser to our clients. Last September, we inaugurated Vallourec & Sumitomo Tubosdo Brasil, our new Brazilian state-of-the-art integrated mill that alreadystarted production and that will deliver 600,000 tons of seamlesspipes all over the world. Very recently, we also concluded the acqui-sition of Zamil pipes, a heat treatment and threading plant of morethan 100,000 tons in Saudi Arabia.

This first issue is also a good opportunity to introduce the newVAM Global Solutions team to you. Indeed, we have just hired ateam of 20 people dedicated to designing and providing our customerswith a comprehensive offering of solutions to complement our OCTGproducts with tailor-made services ranging from well design tosupply chain management and completion packages.

Enjoy reading it and let’s stay connected thanks to CONNECTION!

Thierry Wolkiewiez,OCTG Strategy Director

Scan this QR code with your smartphone and watch the live edito of Thierry Wolkiewiez.

“Let’s stay connected thanks to CONNECTION!”

We wish you a Happy New Year 2012!

VAM® is a registered trademark of Vallourec Mannesmann Oil & Gas France

VAM® AT YOUR FINGERTIPS. GET THE VAM® APP NOW!

CLEANWELL DRY: SUCCESSFULRUN FOR WINTERSHALL NORWAY

CLEANWELL DRY was successfully run in April forWINTERSHALL Norway. 70 joints of 13 3/8” 68# L80VAM TOP with CLEANWELLDRY coating were run byODFJELL casing crew inNorth Sea offshore conditionsand were achieved with verysatisfactory results.

CLEANWELL DRY is the new dope free solution for VAM premiumconnections. A completely dry coating directly applied in the mills on the surface of VAM threads and ready to use on the rig. A successful combination environmentally friendly, safer, cleaner and more efficient.

Basra International Oil & GasConference and ExhibitionVallourec participated in the 2nd Basra International Oil & Gas Conference and Exhibitionin 25-28 November 2011 in Iraq. International Oil Companies and StateCompanies from both Iraq and abroad,participated in this biggest industryevent of Iraq. This was the perfectopportunity for us to introduce our premium products and solutions and to set up valuable exchanges with stakeholders on the booming Iraqi market. Our team receivedvery positives feedback all along the show. We look forward toseeing you next year for the 3rd edition!

FOCUS

PAGE 6VALLOUREC & SUMITOMOTUBOS DO BRASIL:

A GIANTIS BORN

THE TECH FILESPAGE 13CORROSION RESISTANT ALLOY FOR OCTG

SOLUTIONSPAGE 18NEW GLOBAL ACCESSORIES EQUIPMENT SOLUTION:

ACCESSORIES…BUT ESSENTIAL!

ON THE MARKETPAGE 22IRAQI OIL & GAS: THE NEW ERAPAGE 24ACQUISITION OF ZAMIL PIPES:VALLOUREC STRENGTHENSITS PREMIUM POSITIONING IN SAUDI ARABIA

EVENTSPAGE 26VAM LICENSEE EVENT: THREE ACTION-PACKED DAYS...

PEOPLEPAGE 27VAM GLOBAL SOLUTIONS:A LENGTH AHEAD

T H E V A L L O U R E C O I L & G A S M A G A Z I N E # 0 1 - J A N U A R Y 2 0 1 2 T H E V A L L O U R E C O I L & G A S M A G A Z I N E # 0 1 - J A N U A R Y 2 0 1 24 5

Scan this QR code with your smartphone to know more about Cleanwell Dry.

Product Selection Guide to help you

choosing the grades and the VAM

connections that best fit your needs.

Color Codes Finderto help you findingthe steel type forVallourec pipes andcouplings.

Useful toolsyou may need dealing with VAM products.

Our Sales &Services network

Company news

Ask your question to Mr Help

Apple Store: http://itunes.apple.com/fr/app/vallourec-oil-gas/id472623844?mt=8BlackBerry App World: http://appworld.blackberry.com/webstore/search/vallourec?lang=en

Contact: [email protected]

VISIT US AT…Nigeria Oil & Gas 201220-23 February 2012,in Abuja, NigeriaStand S05

IADC/SPE Drilling Conference and Exhibition, 6-8 March 2012, in San Diego, California, USAStand 608

Ghana Summit, 27-29 March 2012, in Accra, GhanaBronze SponsorStand G04

Vallourec Oil & Gas is proud to launch its VAM app available on the Apple Store for iPhone and Blackberry App World. The application is free and includes the following fonctionalities:

news

focus

Vallourec & Sumitomo Tubos doBrasil inaugurates an integrated steelmill with production that will servethe international oil and gas market.

“This is a dream come true for the two groups thatbegan four years ago, when we thought of building oneof the most modern, sustainable steel plants in theworld.” This was the opening remarks of Flávio Azevedo,President of the Board of V & M do BRASIL (VMB) andof Vallourec & Sumitomo Tubos do Brasil (VSB), whoopened the press conference of the VSB steel complexinauguration on September 1st, which invested R$ 5billion in the mill’s construction. Since the placing of the cornerstone which set off thebeginning of the Plant works on July 7, 2007, VSB hassustainability and technology as the focus of its actions. “The placing of the cornerstone represented the begin-ning of one of the largest investments made in Brazilin recent years. In tune with the communities in theJeceaba region and respecting the environment, weplanted the seed for the construction of one ofVallourec’s most important plants,” commented Flávio. VSB’s figures are impressive, starting with the numberof employees that worked in the Mill during the peakof the works – 11 thousand. The production capacityof the plant that will supply the international oil andgas market will be one million tons per annum of rawsteel and 600 thousand tons per annum of seamlesssteel tubes. As with the Vallourec Group, which establishes thatSafety is its Greatest Value, VSB couldn’t be any dif-ferent. With actions directed to promote on-the-jobhealth and safety, excellent results were achieved duringthe construction of the Complex. /...

The first rolled tube in April 2011marked the startup of rolling production with state-of-the-art equipment.

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A GIANT IS BORN

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Even before starting the works, the first step madeby VSB was in the direction of sustainability withthe study of possible environmental impacts causedby the Plant and the compliance to the conditionsproposed by the environmental authorities fo con-cession of the licenses. From then onward, the first challenge would be theearthmoving needed in the 2.5 million m2 of areareserved for the steel making complex within theJeceaba Industrial District, whose total area has12,500,000 m2. During the works, more than 19million m2 of earth were moved, 100 thousandmeters of piles driven into the soil and 200 thousandcubic meters of concrete.

The logistics of the arrival of equipment that wouldstart to give shape to VSB had special care, due tothe complexity and size of the undertaking. A DryPort with an area of 40 thousand m2 was built toconduct the customs clearance and receival ofimported equipment arriving at the complex. “Theorganizational and communications part was vitalto a structure such as this. We received crates ofup to 60 tons down to screws. The lack of a deter-mined equipment could harm the rhythm of the con-struction or operation,” emphasized TancredoMartins, Director General of VSB.

A major differential of the VSB Steel Complex is themanagement of its electrical systems (substations),water and effluents (capture, treatment systems,recirculation systems and physical and chemicalanalysis laboratories), waste and by-products (inter-nal transportation of flasks, bottles, bins and con-tainers, physical/chemical characterization, oil rege-neration unit and dispatch to final destination).Planned from the DBOT model (Design, built, ope-rational, transfer) a contract was signed with thecompany Foz do Brazil for engineering, construction,operation and management transfer, 15 years afterthe contract signing, for VSB.

STRUCTUREThe steel shop buildings and rolling mills at thePlant were built using Vallourec Group structuraltubes. VSB utilized 40 thousand tons of tubularmetallic structures, a volume equivalent to whatwould be used to build the Eiffel Tower. Weighing 74 thousand tons each and capable ofproducing approximately two Thousand tons of pigiron per day, the VSB two blast furnaces are suited for using either charcoal or coke. Like V & M doBRASIL, which uses off gases generated by the blastfurnaces for generation of power, VSB also will adoptsuch a system.

The methodology adopted in the blast furnace pro-cess, besides its effective production, also assuresthe sustainability of the process. Flávio Azevedopoints out that the environmental model chosen byVSB is more eco-efficient, with the use of charcoal,which contributes to the reduction of greenhousegas effect emissions. “This will be one of the largestcharcoal based steel plants in the world,” he men-tions. The VSB steel shop is the first in the world builtwith a tubular metallic structure and equipped withunique to Latin America: the CONSTEEL process.Together with the electric arc furnace (EAF), it opti-mizes energy consumption and assures greater con-trol over the steel fusion process, with low level ofnoise and particulate emissions. Another differentialof the area is the casting of large-diameter bars (406mm), another first in the Vallourec Group. The equipment used by VSB makes the differencein the product’s final quality. The three-roll PQFmill, for example, uses state-of-the-art. The entireprocedure is made up of a rotating heating furnace,

Tancredo Martins, Director General, VSB

With four years of worksand more than 11 thousandemployees working on theconstruction of Vallourec & Sumitomo Tubos do Brasil(VSB), the new steel makingcomplex, inaugurated inSeptember, marks the history of the Vallourec Group, notonly by it being a steel plantwith cutting-edge technology

equipment, but also for it becoming an important channelin the production of seamless steel tubes. In order to have a dimension of the importance of a newplant for Vallourec, the annual production of 600 thousandtons of VSB tubes (of which 300 thousand go to Vallourec)will increase the Group’s capacity by 10%. Due to the complexity of the equipment and the concernwith the high quality of the products, step by step, all thePlant’s areas have begun to take shape and enter intooperation. In terms of health and safety, we have broken a record for large-scale, complex Works. The safety results of thecontractors during assembly and installation was achievedtopping the goal established by the Group. It is operationalprocess safety that is already worked on every day withour collaborators by means of awareness campaigns. Since the startup of the plant construction in 2007,

VSB has worked under the banner of sustainability in itsactions. To this end, it develops not only its collaboratorsbut also the surrounding communities to the plant. VSB seeks to make aware and motivate everyone to preservethe environment. For this, it created a Reference Centerin Revegetation of the Atlantic Forest in a space close to the Plant, where thousands of native species saplingshave already been planted. With the main objective ofrecovering the referred areas through different scientificallyconsolidated revegetation models, monitoring will be donein the development of the saplings planted, periodicallyqualifying the progress of the biodiversity of fauna andflora, biomass and stored carbon.As an installed company, there will be 1,600 direct Jobs.It is also important to point out the role of each employeefor VSB’s success. The efforts and commitment of all its collaborators so that the Company will obtain therecommendation of certification in norms API/Q1, API 5l,API 5ct, ISO/TS 29001 and ISO 9001 of the AmericanPetroleum Institute (API), demonstrates that all arealways focused on quality. We have achieved the resultwithout non-conformity with the requisites evaluated.Fruit of a joint venture formed between Vallourec andSumitomo Metals, partners for more than 30 years in thefield of premium connections for the oil and gas industry,VSB will have the commitment to maintain the quality ofits products and maintain credibility of the two groups inthe international seamless steel tube market.”

SOLUFOCUS

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The building that give VSB its form was constructed with structural tubes produced by the Vallourec Group.

Aerial view of the VSB steel making facility, whosearea is 2.5 million m2.Annual production will be one million tons of crude steel and 600 thousand tons of seamlesssteel tube. Image produced in February 2011.

The VSB steel makingproduces steel bars withdiameters of 270 mm,310 mm and 406 mm.


a cone-type piercing mill, a five-stand PQF mill, a reheating furnace and a 12-stand calibratingmill. “In technological terms, this is the mostmodern rolling mill in the world, because it pro-

duces petroleum tubes with superior quality to theothers,” says Tancredo. The integrated Mill is focused on the fabricationof oil country tubular goods (OCTG) used in drilling,well lining and tubes for petroleum and gas pipe-lines. The production process assures the qualityof the tubes, which are highly resistant to diverseconditions of temperature and pressure. The OCTG finishing area is divided into two parts.The Flex Line, dedicated to the production of so-called line pipe, which are used in gas and oil pipe-lines, such as in chemical plants and petroleumrefineries. They are prepared to resist varied pres-sures and temperatures. Another finishing area isthe Fast Casing Line, which will make the threadsof the API connections and of the VAM TOP con-nections, which offer gas seal, even under the mostsevere conditions, including deep wells, directionalwells and hostile environments. The evaluations to assure the quality of the tubesare rigid. Non-destructive testing, which analyzesthe products with ultrasonic equipment, electro-magnetic inspection, in addition to visual inspectionperformed by highly qualified technicians. Thesetechniques are done with latest generation appa-ratus, guaranteeing total integrity of VSB products. VSB tubes are submitted to hydrostatic testing,where they are filled with water until they reachpressures of up to 1 500 bar. At the end of testing,the tubes are coated to protect them from corro-sion. “VSB is the only company in the Vallourec Groupthat possesses this capacity of testing within the

range of the diameter that we are working, whichgoes from 6 5/8” to 16”. This standard is abovethat required by the American Petroleum Institute,”mentions Tancredo. The forecast start up is for 3rd quarter 2012.The VSB pelletizing plant will produce 1.36 million tons of iron pellets destined to feed theblast furnaces of the steel plant. Half of this production will be sent to V&M do BRASIL. VSBwill be the first steel plant in Latin America toinstall the iron ore pelletizing process within thesteel making complex. The man advantage is thatthe pellet is a high-value added product with ad-justed chemical quality to increase blast furnaceproductivity. “The application of cutting-edge technology greatlycontributes to the development of our steel makingcomplex, in addition to our engineers and techni-cians. Allowing contact with new technologies isan important step to advance in any productionindustry and, therefore, for the growth of the coun-try,” comments Tancredo. Audits performed at the Company in August of thisyear attested to the quality of management at VSBthrough the following certifications: ISO 9001 andISO / TS 29001, as well as API/Q1, API 5L andnorms API 5CT. ISO / TS 29001.

BRAZIL AS OUR HOMEThe choice of Brazil as VSB headquarters wasimportant for the export strategy to be adopted by

the Company, since the country possesses infras-tructure under development and inputs needed forproduction. The strategic geographic location, witheasy highway and railroad access to ports fromwhere the products will be shipped, was an impor-tant aspect in choosing the location. Minas Gerais,which had already hosted VMB in Belo Horizonteand its subsidiaries V & M FLORESTAL (VMFL) andV & M MINERAÇÃO (VMMN), was chosen to hostthe complex. “It is important to emphasize thatthe proximity to VMMN, VMFL and VMB was funda-mental in choosing the place to host the complex,”recalls Tancredo.

SOLUFOCUS

10 11

/...

“To be here in Jeceaba today is a very special moment forme, because I am taking part in a very relevant ceremony for

my country and very relevant to my Minas Gerais.

This mill we are inaugurating today marks a new era inBrazil. It is a fundamental moment right now, this very

moment in which our country maintains a high growth rateand strong growth prospects.

We are taking part in the inaugurationof a plant which has aunique characteristic – it uses the most advanced technologyin its area and at the same time, transforms and adds value,

still in our country, to our iron ore.

Being here today is very important for the President of theRepublic. What I saw here in this visit shows a great

advance in the steel industry.

So I wanted to congratulate you. For Brazil and Minas Gerais, it is very important that Vallourec and Sumitomo

have made an investment of this magnitude.”

Dilma Rousseff, Brazilian President

Inauguration speech on September 1st, 2011.

“Present since 1952 in the state of Minas Gerais via its V & M do Brasil subsidiary, Vallourec chose to pursue its development here with this new plant, as it benefits locally from the full range of competitive factors, not only in terms of natural resources – iron ore and charcoal – but also in terms of infrastructure and skilled labour.

This plant marks a new stage in Vallourec’s strategic growth. It will enable the Group to support the ambitions of its international customers, and serve their requirements for premium tubular solutions for oil and gas applications.”

Philippe Crouzet, Chairman of the Management Board.Inauguration speech on September 1st, 2011.

The President of Brazil,Dilma Rousseff, unveiledthe inauguration plate atVSB together with Group

President PhilippeCrouzet, Chairman of the

Construction Council,Jean-Paul Parayre,

Minister of Development,Industry and Foreign Trade,

Fernando Pimentel,Governor of the State

of Minas Gerais, AntônioAnastasia and President

of Sumitomo Metals, Hiroshi Tomono.

During the visit to the rolling plant, President Dilma Rousseff had the

opportunity to watch the rolling of seamlesssteel tubes together with VSB partners.

In his speech, the President of the Vallourec Group,Philippe Crouzet, pointed out the importance of the new plant for the French group.


#01

CORROSIONRESISTANT ALLOYfor OCTG

DEFINITION AND HISTORYThere are several ways for managing downhole cor-rosion, from doing nothing to implement immunematerials like CRA. For the end user, the main pur-pose of CRA tubing is not to resist corrosion butto find out the overall less expensive solution. Inthe oil and gas exploration, in many areas effluentsof the wells are corrosive and the trend is on theincrease.The stainless steels appeared around 1870, and at the beginning they were named “rustless”.

The first target was to avoid corrosion in the gunsfor weapons. Those rustless alloys then demons-trated their advantages for many other usages likein chemical industry. The true development of stain-less steels large mass production started in thesixties with the steel melting and refining techno-logies such as AOD and VOD. In the seventies thedevelopment of gas research and production in corrosive wells leaded to develop specific OCTG grades.

/...

At a glance the OCTG Corrosion Resistant Alloy (CRA) market is avery small part: about 0.1% of the world wide stainless steel production.But this part is fundamental for the exploration and productionof gas mainly in the more and more severe conditions.

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13

the tech files

COMPOSITIONMetallurgists consider steel as stainless if it con-tains a minimum 10.5% Chromium that creates aprotective passive layer at the surface of the productagainst corrosion. Some elements like Molybdenum,Copper… can reinforce the corrosion resistance. Stainless steels are sorted by ISO 13680 and API5CRA in 4 classes related to their metallurgicalstructure: martensitic, ferritic, austenitic-ferritic(or duplex) and austenitic. Martensitic (mainly13%Cr and super 13%Cr) are hardened by appro-priate heat treatment, but their use is limited to

environment with low H2S partial pressures.Contrary to duplex and austenitic, ferritic alloysare not used in OCTG: their mechanical characte-ristics are very difficult to strengthen by cold har-dening.Cold hardening (or also known as cold working orstrain hardening) is the strengthening of a metalby plastic deformation. Shaping the product atambient temperature it allows reaching desiredyield strength and final dimensions. It is the mainprocess used for CRA.

Pilgering process Drawing process

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#01

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WORLDWIDE VOLUMEWorldwide volume of stainless steel production isabout 30,000,000 tons/year (flat and long products, all industries) and main alloys used forproduction are Chromium (Cr), Nickel (Ni),Molybdenium (Mo) and Tugnsten (W). Price of those

alloys (ex : 3 USD/Kg for CR, 20 USD/Kg for Ni,…) and their proportion in the final product (31%of Ni in a 28% Cr for ex) as well as their quotationson stock markets explain their high costs and theirdaily fluctuations.

PRODUCTION PROCESSStainless steel production also requires specificmills. The high alloy content and the requiredthermo-chemical equilibrium lead to refine steelusing AOD (Argon Oxygen Decarburisation) or VOD(Vacuum Oxygen Decarburisation) operations. Steel

is then casted into ingots, then transformed intobars that will be used to produce seamless pipesafter piercing, extrusion (extruded product are so called hollow) and cold working. This specificprocess participates also to their price level.

MARKET EVOLUTIONWorldwide OCTG yearly demand is estimated atabout 7,000,000 tons among which :l Martensitic alloys represent about 200,000

tons/yearl Duplex and austenitic demand is between

25,000 to 30,000 tons/year. CRA used in OCTG (from 225,000 to 230,000tons/year) is then a niche among the worldwidestainless steel market (30,000,000 tons/year).

Meanwhile, despite its small market volume andtheir costs:l Market trend for Duplex and austenitic used in

OCTG is at growth: it is estimated to be at about+25% on the 2012-2015 period. Additionalneeds will mainly be brought by the Brazilianfield of Tupi which long term estimated volumes(around 10,000 tons/year by 2015) should com-pensate the decrease that will happen in othermarket areas mainly because of depletion of oiland gas fields.

l CRA contribution to sales is not negligible andhas to be disconnected of the volumes sold.Although in 2010, CRA represented a negligible

0.2 % of the total volume of pipes delivered by Vallourec it represented 1.1 % of its sales.Those 2 proportions are expected to significantlyincrease in the coming years.

Major market areas are located in North Sea (ex:Elgin Franklin), Middle East (ex: Shah, SouthPars…), Brazil (ex: Tupi) and GOM. Austeniticrepresent 70% of the OCTG CRA market and largediameters (6-5/8” and 7” mainly) represent 65%of the worldwide need. On a long term, markettrend is to the request of larger diameters (9-5/8”and above).

VALLOUREC EXPERTISEVallourec is an integrated manufacturer of seamlesspipes OCTG from carbon steel up to 13% CR andSuper 13%Cr steels. For CRA (22% Cr and above),Vallourec has established its strategic partnershipwith the Spanish Supplier Tubacex, an integratedworld leader in the manufacturing of seamlessstainless tubes, in order to optimize the productionof seamless stainless tubular for OCTG. Partnershipwas signed and announced on February 2009. In that alliance Tubacex is in charge of supplyinghigh quality CRA tubular when Vallourec hasresponsibility of technical and communication rela-tionship towards end-users, threading and com-mercialization of final.

This organization is aimed at offering to the marketan optimized synergy of the respective areas ofexcellence of both companies:l Vallourec expertise in threading and testing

of leader proprietary connections of the VAMfamily

l VAM field service support on VAM connectionl VAM licensee / repair network on VAM connection

l Tubacex expertise in stainless seamless tubeproduction for Oil & Gas and non Oil & Gas pro-ducts

l Tubacex integrated production including steelmill and tubular production

l Cooperative R&D and technical expertise onstainless grades production and testing, withfull support from Vallourec corrosion and metal-lurgy research center (Vallourec ResearchAulnoye – VRA)

The partnership also beneficiates from Vallourecpast experience in CRA supply for OCTG. Tubacexand Vallourec have notably conducted thoroughindustrial qualification of OCTG production accor-ding to Vallourec proprietary specifications in orderto ensure consistency in quality of supply. All CRA grades are produced according to proprie-tary Vallourec specifications and can be threadedwith major connections in the VAM family. VAMconnections have an extensive qualification historyon CRA and are threaded on about 80 % of allOCTG CRA supplied worldwide.

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NEWS FOCUS SOLUTIONS ON THE MARKET EVENTS PEOPLE

APPLICATIONSChoice of alloy depends upon the severity of theenvironment and the strength requirements andbecause presence of H2S and chlorides complica-tes the selection of alloy for a specific service ISO15156 / NACE MR0175 provides guidance on thematerial selection process.OCTG CRA shall be used as soon as partial pressureof CO2 (pCO2) is above 2psi (12kPa). Then depen-ding on H2S partial pressure (pH2S) NACEMR0175 recommends:l For pH2S up to 0.1 bar (1.5 psi): Martensitic

(13% Cr and Super 13% Cr)l For pH2S from 1.5 to 3 psi: Duplex (25% Cr

and Super 25% Cr)l If pH2S higher than 3 psi: Austenitic (28% Cr

and above)

Well temperature and demanded mechanical resi-stance in situ are also 2 other discriminating factors. Duplex and austenitic have weak tensile perfor-mances: their Specified Minimum Yield Strength(SMYS) is between 60 and 80ksi. To get strongertensile performances, cold working is needed (eitherdrawing or pilgering). The yield strength range isrelated to the material ability to get the adequatereduction ratio (Reduction Of Area or ROA) betweenhollow and cold worked product. Cold hardeningcan achieve on CRA SMYS 110 to 140ksi: interestis to keep the same level of resistance for lowerweight i.e. lower cost.

CORROSION RESISTANT ALLOY FOR OCTG

THE TECH FILES

Slightly sour - HPHT - DuplexSevere sour - Ni-based

250°C

200°C

150°C

100°C

50°C

MR0175 Table A 25 (25S)

1 10 100 1,000 10,000

H2S kPa

MR0175 Table A 14 (28Cr & 825)MR0175 Table A 14 (G3)MR0175 Table A 19 (S13)

MR0175 Table A 14 (C276)MR0175 Table A 19 (13Cr)


Cr22,025,025,0

Ni5,56,57,0

Mo3,03,03,5

W

0,30,8

N0,10,20,3

UNS NoS31803S31260S32760

SMYS

65SA

75

SA

80

SA

110CH

125CHCHCH

120TiCu

0,50,8

Category22-5-325-7-325-7-4

27-31-421-42-322-50-720-54-9

SA=Solution Annealed CH=Cold Hardened

27,022,022,020,0

31,042,050,054,0

3,53,07,09,0

1,02,22,0

N08028N08825N06985N06950

CHCHCHCH

CH

CHCH

CH0,1

1,0

Structure

Duplex

Super Duplex

Austenitic

V&M GradesVM 22VM 25

VM 25S

VM 28VM 825VM G3VM 50

140CHCHCH

#01

/... Present on the OCTG CRA market since the eigh-ties, Vallourec has already delivered numerous cus-tomers on that different market areas: l Total, British Gas, BP, … in North Seal ADMA, ADCO, KOC, … in Middle Eastl Petrobras in Brazill But also: Gazprom, Exxon, Shell, Sinopec,

Talisman, Tullow … in other regions

Like for all OCTG, CRA Customers follow a quali-fication process that includes check of QualityAssurance / Control, ability to produce volumesand grades and quality of the product through cor-rosion tests. Two Customer policies co-exist on thislast item:l One is based on specification without reference

to field conditions, which are unknown by supplierl Other is based according to a medium that

approximate field specific conditions

In these 2 ways of qualification, Vallourec can givesome advices, but final choice of grade remains inall cases under Customer responsibility.

The main type of corrosion tests demanded is withan applied stress. There are also tests without stressthat quantify the resistance of localised or gene-ralised corrosion. They are performed at differenttemperatures. Examination of coupons after testquantifies the level of corrosion. Measurement ofattack allows Customer to rank material from dif-ferent suppliers and reinforce its selection choice.Tests with stress are split between test within elasticdomain and above elastic. They are screening testswith different partial pressures of CO2, H2S andtemperatures and all other parameters that couldbe given by customers and depending of well conditions.

Tests within elastic domain are trials to understandthe material behaviour as in the well. Demandedtests are NACE A (Tensile) or C (C-ring) as describedin NACE TM0177.

Test above elastic domain is SSRT (Slow StrainRate Test) conducted up to rupture. “Slow” because1 test lasts about 1 day.

PRODUCT OFFERVallourec has developed a wide range of CRA for OCTG from to Austenitic Nickel base. The table belowshows all the available grades.

The Vallourec grades have been tested NACE A and C in differentenvironments. NACE A is preferredbecause it is closer from the con-dition of use in the well. The conditions of use (pH2S andtemperature only) by the customersare given in the following graph.

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NEWS FOCUS SOLUTIONS ON THE MARKET EVENTS PEOPLE

CORROSION RESISTANT ALLOY FOR OCTG

THE TECH FILES

Contact:[email protected] [email protected]

250°C

200°C

150°C

100°C

50°C

MR0175 Table A 25 (25S)

1 10 100 1,000 10,000

H2S kPa

MR0175 Table A 14 (28Cr & 825) MR0175 Table A 14 (G3)Customers conditionsMR0175 Table A 14 (C276)



Constantly in pursuit of customer interests, VallourecOil & Gas teams have learned one certain fact: oiland gas industry operators and original equipmentmanufacturers (OEM) consider accessories equip-ment among the most technical and difficult in termsof timing in supply chain management of explorationand production work. A survey conducted in 2009also found that those same customers expect thattheir main tubular and connection supplier wouldalso offer them a full range of accessories equipment."This finding backed up what we had sensed,"explains Olivier Mathey, head of Central Planning,Accessories Equipment. "We had already consideredthe possibility of offering our customers a globalsolution featuring a complete line of products andservices. A number of conditions had to be met forthe new line to satisfy our company's strict added-value requirements. Mission accomplished!"

AT THE RIGHT TIME…As operating conditions grow increasingly difficult,wells are getting more complex and accessoriesequipment involves ever more specific components.As the vital interfaces between tubing, casing andcompletion equipment, accessories componentsmust meet the same performance, quality and avai-lability requirements. "Accessories products alsorequire a lot of flexibility – a high proportion arecustom-made – and responsiveness – requests oftenhave to be met on an extremely urgent basis toavoid any delays," adds Olivier Mathey. "Accessoriesequipment must fit the well and not the other wayaround. For all those reasons, we focus solely

on products for which we have all the know-how required at Vallourec. Pup joints, nipples, crosso-vers, flow couplings, circulating heads, lifting plugs:our line (see text in box page 20) features a dozenclearly identified items that meet our customers'current needs."

…AND THE RIGHT PLACEThough the idea of creating a complete, compre-hensive line of accessories equipment had beentaking shape for some time in the OCTG Division,and this process was jump started in 2008 withthe acquisition of V & M Tube Alloy (USA).

When bringing the new subsidiary on board, aninventory of synergies and complementarystrengths with other Vallourec units found thatsubstantial industrial resources already existed ina number of production units dedicated to OCTG,at VAM Drilling and even in our Energy & IndustryDivision. Accessories equipment of varying degreesof complexity are made from OCTG, coupling blanks,forgings, mechanical tubing, and solid bars. Now within the Vallourec organization all ordersfor accessories equipment can be filled with theproper technical specification, on time, anywherein the world.

NEW GLOBAL ACCESSORIES EQUIPMENT SOLUTION

ACCESSORIES…BUT ESSENTIAL!Vallourec Oil & Gas is adding another featherto its cap. VAM Global Solutions, the platformof its customer-focused strategy, is branching outwith a complete line of accessories equipmentfor oil and gas operators and original equipmentmanufacturers. The new offer combines products and services in a global solution covering every step from plant to well.

9 production sites

Batam

Houma

Houston

Veracruz

Rio das Ostras

BellshillRathAulnoye-Aymeries

Cosne-sur-Loire

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SOLUTIONSSOLUTIONS

“We recently askedone of our Germanplants to customfabricate three tubular blanks so that we couldmake three 15”/14”sour service steelcrossovers. A first!”

/...

Control of the outside diameter after machining

at VAM Mexico.

Sand blasting operation

at V & M Tube Alloy in Houma.

Stock of couplings before make-up on pup-joints at VMOGF Aulnoye.


Accessory portfolio

• Pup Joints• Blast Joints• Wire line Entry Guides• Test Cap/test plug• Mill out Extensions• Perforated Pup Joints• Flo-Pups®

• Crossovers• Lifting Plugs/Sub

• Couplings• Marker Joints• Specialized Equipment(Taylor made equipment)

• Flow Couplings• Half and full Mule Shoes• Handling Plugs/sub• Oriented Couplings• Bull Plug

ORGANIZATIONThis service, which is a main pillar of VAM GlobalSolution, relies on a sales organization managedfrom the United States that caters to two maincategories of customers. One is the oil and gas ope-rator, which will be offered the accessories linethrough their usual supply chain responsible fortubes and connections. The other is OEMs suchas Baker Hughes, Halliburton and Schlumberger,for which dedicated sales and technical teams havebeen set up. This will also help us enhance busi-ness relations with OEMs and provide end usercustomers with more appropriate, better coordina-ted solutions, especially for complex projects. In the same strategy, we also offer OEM’s VAM thre-ading services for select parts made at their shopwhich eventually require a VAM thread. We offerto threads these parts in our accessory manufac-turing locations or where volume warrants, placethreading capacity in line directly inside the cus-tomer facility.

ADDED VALUEA single contact, technical support and supplychain coordination are all services that add valueto the offer. The main goal of the new accessoryorganization and value we bring to the customeris reducing the risk that the equipment involvedin the accessory offer will interfere with the ope-ration of an oil and gas project. A company likeVallourec has all the tools to provide this compre-hensive offer of pipe, threads and accessories. Vallourec and its plants have made a commitmentto follow this strategy through its VAM GlobalSolutions services platform. A crossover meets thesame specifications and quality criteria whether

it is made in the United States, Great Britain orFrance. “By applying Vallourec's quality assurance rules to the accessories product line,” concludes OlivierMathey, “we plan to restore accessories equipmentto its rightful place. From now on, accessoriesproducts are not just after-thoughts.”

Contact: [email protected]

20

/...

SOLUTIONSSOLUTIONS

Components of a taylor-made

cross-over before final threading and assembly.

Marker jointready for running.


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SOLUTIONSON THE MARKET

With wars and embargos, Iraq's history over the pastthirty years has been marked by a series of dramaticevents, hampering the continued development of itsoil production. Iraq is a member of OPEC — althoughnot included in quotas — and it has the fourth biggestoil reserves in the world. This oil is typically easy toextract from shallow, accessible reservoirs, except inKurdistan (Northern Iraq) which has a more challengingdrilling environment. Oil remains Iraq's main sourceof income and as such, drives the country's economicgrowth. In fact, its government has huge ambitions,aiming to become the world's leading producer by 2017,with talk of 12.5 million barrels a day by then, com-pared to just 2.5 million in 2010. According to mostindustry experts, production could reach 5 millionbarrels a day over the next five years, which is alreadya major challenge for the holders of drilling permits.

LEADING THE FIELDThe majors, drilling contractors and national oil com-panies, already purchase a large share of their premiumand semi-premium tubular solutions from Vallourec.The VAM range of connections is used extensively, dueto the procurement practices of the International OilCompanies (IOC) working in Iraq and the corrosivedrilling conditions often requiring sour service material.With increasing exploration of gas reserves, Vallourecintends to lead the field and further consolidate itsposition on the Iraqi market. The Group aims to achievethis through the performance and quality of its productsand its unwavering desire to help customers rise tothe challenges they face, whatever and wherever theyare. All initiatives of this kind are closely supervisedand strongly supported by Vallourec.

THE FIRST VAM LICENSEEThe first VAM licensee, located in the capital of IraqiKurdistan, Erbil, was qualified this year, clearly illus-trating Vallourec’s strategy to support operators in

Kurdistan. ‘Mountwest’ is now qualified to work onpremium products in the VAM range — for example,VAM TOP, VAM TOP HC and VAM TOP HT. As a directresult, the VAM tubular supply chain will be consi-derably simplified.This addition to the VAM licensee network was cele-brated on 11 October at an event organised at the ErbilRotana, attended by customers, representatives of theIraqi and French authorities as well as staff fromVallourec. The programme included a visit of theMountwest workshops with a demonstration of a VAMconnection repair, as well as a technical seminar presenting premium products and the specific per-formance of the various steel grades available. Thesuccess of this event clearly points to the local demandand interest in Vallourec OCTG tubular technology.Vallourec fully intends to respond to this demand on aregular, in-depth basis. The latest date on the Iraqicalendar was the Basra International Oil & Gas Confe-rence and Exhibition held from 25 to 28 November,which provided another opportunity for valuable exchan-ges with stakeholders on the booming Iraqi market.

IRAQI OIL & GAS THE NEW ERAIraq's oil reserves are the envy of most of the other oil-producing

countries in the world. In a country determined to make the most of its wealth so as to secure economic growth, Iraq has big ambitions

to fast track the production of its fossil fuels. Numerous stakeholders in the oil industry are being called into action as part of this recovery.

More than ever, Vallourec is working by their side.

Visit of Mountwest repair shop.

Quality control.

VAM technical seminar at Erbil Rotana.


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SOLUTIONSON THE MARKET

This acquisition provides Vallourec with ready-to-run heat treatment capacity and threading facilitiesof up to 100 kt of pipe per year which will be combined with the existing project to build a VAMthreading facility, on the same site. These operationsreinforce Vallourec’s local presence with end-finishingfacilities to serve the premium OCTG market in SaudiArabia and the Middle East.Philippe Crouzet, Chairman of Vallourec’s Manage-ment Board stated: “Increasingly complex and challenging drilling conditions and important safetyand environmental considerations are driving demandfor premium OCTG and VAM® connections – the leading premium connections in the world. Theseinvestments are fully in line with our strategy tostrengthen our local presence and provide more premium solutions both in North America, where weare a leading domestic supplier of OCTG; and inSaudi Arabia, in response to growing demand fromthe world’s largest oil producer, Saudi Aramco, andother customers in the Middle East.”

ACQUISITION OF ZAMIL PIPES

VALLOUREC STRENGTHENS ITS PREMIUM POSITIONING IN SAUDI ARABIAVallourec completed the acquisition of Zamil Pipes on 25 November 2011, for a total consideration of 3 97 million.

Premium threading lines.

About Zamil Pipes

Saudi Seamless Pipes Factory Company Limited "ZamilPipes", member of the Zamil Group Holding Company, was founded in November 2007 to address the needs of thedrilling industry by developing the Saudi’s first processingand end-finishing processor of Oil Countries Tubular Goods"OCTG".


A total of 84 attended the previous event and 110were in attendance for the second which was held from12 to 14 September at the Grand Palais in Lille. Theincrease in participant numbers goes to show the enthu-siasm of VAM licensees throughout the world. On the first day of this big event, the focus was on net-work organisation and how it works. In the afternoon,workshops were held to look closely at surface treat-ments and torquing, for which corrective action issometimes requested during the regular quality auditsconducted by VAM Services auditors. Even during theVAM Licensee Event, the quality of service providedby licensees throughout the world remains the number1 priority...

DISTINCTIONS AND PRODUCTIONDuring a dinner to mark the Licensee awards ceremony(see text box), the host, Philippe Emery, Deputy ManagingDirector of OCTG Europe, took every opportunity toremind us of the importance of the VAM licensee networkin the commercial strategy of Vallourec. The following day, the participants were split into several groups and went to visit the factory facilitiesof Aulnoye-Aymeries located approximately 90 kmfrom Lille. These included the finishing lines, test station and, of course, the building dedicated to gauges which, when distributed throughout the global network,enable licensees to very carefully respect requireddimensions when working on connections.

STRESS-RELIEVING AND NEW TECHNIQUESThe third day consisted of a series of both technicaland commercial presentations. Speakers from theR&D and VAM TCC services expertly raised the issuesof stress-relieving by thermal means after deformationand accessory design rules. Many detailed exchanges,to say the least, revealed that event organisers hadbeen fully justified in their choice of topic. In theafternoon, participants were given the chance to dis-cover the details of new OCTG and drilling premiumproducts that will pass through their workshops inthe relatively near future. Everyone was able to seethat the partnership between Vallourec and its licen-see network has still got a very promising future.After taking part in a Q&A session and enjoying atypical dinner from the north of France, participantswere then able to return home exhausted but evidentlyvery satisfied with this three-day action-packed event.

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SOLUTIONSEVENTS

PEOPLE

Whatever your tubular product needs may be,Vallourec Oil & Gas will take care of everything...This is what VAM Global Solutions is all about andit is offering a new, premium and comprehensiverange of solutions from the mill to the well. The aimis to ensure that clients can focus on their core busi-ness activity, where the real added value lies. Leaving

ideas and basic rhetoric aside, VAM Global Solutionshas now become a reality and is incarnated by menand women who are determined to maintain thedecisive head start it has over its competitors foryears to come. Here are just a few of them and thetasks that they are assigned...

Mathieu Robbe, Project Director "Develop customer-driven solutions to complement our OCTG offer"

Antoine Caillard, Well Design Engineer "Provide support and advice to our customers in the well design phase"

Sébastien Cochet, Application Manager "Propose application oriented solutions to our customers, including products and services"

Rafael Perez, Tubular Essentials Project Manager"Offer the best education available on tubular products,from conception to completion"

Hartley Taylor, Supply Chain Project Manager "Provide customized added value services close to our customers locations"

Anne Bertrand, Technical Logistics QHSE Manager"Maintain premium QHSE standards along the whole service chain"

Caroline Camuset, Demand Manager "Propose adapted delivery time options to meet our customers needs"

Arnaud Pardé, Freight Solutions Manager "Deliver the right productsin good conditions at the right time, at the right place"

Aaron Brammer, Accessories General Sales Manager and Olivier Mathey, Accessories Planning Manager "Become the reference supplier of VAM accessories to all customers"

Karim Toubal, Field Services Commercial Manager"Develop new Field Service offersfrom the yard to the rig"

Pierre Lavirotte, VAM Licencees Business Development Manager "Optimize our VAM licencees network to better support our customers"

VAM GLOBAL SOLUTIONS

A LENGTH AHEAD

The team

Connection magazine will look at VAM Global Solutions in greater detail in a future issue.

VAM LICENSEE EVENT

THREE ACTION-PACKED DAYS...Vallourec currently has the support of a network of 172 VAM licenseesthroughout the world. These licensees are an essential part of the global product and service offerand they are authorised to repair VAM family premium connectionsand provide accessories in keepingwith operator needs. In mid-September, 110 of them descended on Lille, in the North ofFrance, to attend the second edition of the VAM Licensee Event...

Six well-deservedawards

In recognition of their outstanding contributionand of the high quality achieved in the manufac-ture of VAM productsaccording to VAM Services standards, the best licensees in 2010 are:

Best Overall LicenseeDeer Park Oil Tools Pty LtdPerth - Australia

Best Licensee of the Threading FacilitiesV & M Deutschland GmbHMülheim - Germany

Best New ComerWeatherfordAbu Dhabi – U.A.E.

Best Original EquipmentManufacturersHalliburton Manufacturing and Services LtdArbroath – U.K.

Best ImprovementMécanic-Sud IndustrieBéziers – France

Best Drilling LicenseeVAM Drilling USAHouston – U.S.A.


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