The Gazprom headquarters hosted a regular meeting of Alexey Miller, Chairman of the Company's Management Committee and heads of Russian pipe manufacturing companies.

Taking part in the meeting were Deputy Chairmen and Members of the Gazprom Management Committee, heads of the Company's specialized structural units and subsidiaries, Ivan Shabalov, Chairman of the Pipe Producers Association Coordinating Council, Anatoly Sedykh, Chairman of the United Metallurgical Company Board of Directors, Dmitry Pumpyansky, Chairman of the Pipe Metallurgical Company Board of Directors, Andrey Komarov, shareholder of Chelyabinsk Pipe Rolling Plant, Alexey Mordashov, Director General of Severstal, as well as heads of other companies.

Gazprom has a long history of successful cooperation with Russian pipe manufacturers, including interaction in innovative products development. The unique large diameter pipes specially developed for the construction of the Bovanenkovo – Ukhta, a new generation gas trunkline system, may serve as an outstanding example of such cooperation. These 1,420 millimeter high-strength cold-resistant flow-coated pipes made of K65 (X80) steel are designed for the operating pressure of 11.8 MPa – the world's record for onshore gas pipelines.

“Gazprom has new gas transmission megaprojects ahead – South Stream and Power of Siberia. We place higher demands on the pipes that will be used for the construction of these gas pipelines. For instance, the Power of Siberia gas trunkline system will be laid through a territory of high seismic activity. We need pipes that will secure reliable gas transmission in such complicated conditions.

For the first time in the global history of offshore gas pipelines construction, the pipes with a 39 millimeter wall thickness designed for the operating pressure of 27.73 MPa will be used while implementing the South Stream project. Moreover, it will be the first time when 813 millimeter pipes will be laid as deep as 2,250 meters.

I invite you to take part in these projects, but once again I remind you that they should be implemented in line with the highest global standards,” said Alexey Miller.

The meeting participants discussed the test results of experimental large diameter pipe (LDP) batches designed for the construction of the South Stream offshore section. The pipe test results and production specifications were verified by DNV certification body that confirmed the possibility of their production and application during the construction of the South Stream offshore section.

It was noted at the meeting that Gazprom and pipe manufacturers were discussing the possibilities of creating the Ő100-Ő120 large diameter pipes designed for the operating pressure over 11.8 MPa with reduced metal consumption, threaded pipes with leak-proof thread for offshore and onshore gas production, pipeline fasteners of up to 1,420 millimeters in diameter for the operating pressure of up to 28.45 MPa and other innovative products.

The meeting paid special attention to the results of work under long-term contracts based on the price formula. According to estimates, the application of the formula resulted in the LDP price decrease by 3.85 per cent in the second half of 2012 as compared with the prices of December 2011 (starting date of the price formula application). The prices of the first half of 2013 decreased by another 1.7 per cent as compared with the second half of 2012. The total LDP price reduction amounted to 5.5 per cent as compared with December 2011, therefore enabling to considerably reduce the expenditures for purchasing pipe products. The price formula application respects the interests of both pipe manufacturers and Gazprom. It provided for the increase in the LDP prices predictability and elimination of their acute fluctuations, secured mutual guarantees for stability and fairness of LDP prices.

“The application of the price formula to large diameter pipes proved to be efficient. We will apply it in further work with pipe manufacturers. As the next step we will shift the price formula application to seamless pipes and external corrosion-proof coating pipes. As a result, the formula will be used in calculating prices for 95 to 97 per cent of purchased pipe products. We will almost completely switch to the formula based pricing for pipes from July 1 of the current year,” said Alexey Miller.

The next regular meeting will take place in June at Izhora Pipe Plant.

Background

The meetings of the Gazprom Management Committee Chairman Alexey Miller and heads of Russian leading pipe manufacturers are held on a regular basis.

The main pipe suppliers to Gazprom are United Metallurgical Company, Pipe Metallurgical Company, Chelyabinsk Pipe Rolling Plant and Severstal.

At the meeting held in November 2011 Alexey Miller and heads of the leading pipe manufacturing companies approved the price formula to be applied when concluding contracts for pipe products supply, primarily large diameter pipes (LDP).

In 2012 Gazprom inked the Sci-Tech Cooperation Agreements with pipe manufacturing companies, including United Metallurgical Company, Severstal, Pipe Metallurgical Company and Chelyabinsk Pipe Rolling Plant.

The agreements are aimed at increasing the efficiency of innovative activities of Gazprom and pipe manufacturing companies.