Borusan Mannesmann to invest $150 million in US OCTG facility
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One of Turkey's leading pipe producers, Borusan Mannesmann, has announced that its US-based subsidiary Borusan Mannesmann Pipe US Inc will invest $150 million to set up a pipe production facility targeting the energy industry.
The pipe producer stated that it had to respond to the significant growth of shale gas production in North America and so decided to set up an oil country tubular goods (OCTG) pipe facility with an annual output capacity of 300,000 mt to meet the demand driven by shale gas and oil production. The facility will produce steel pipes which are used in oil wells and transfer lines. Additionally, a heat treatment facility will be built to produce small diameter line pipes.
According to Borusan Mannesmann's statement, the facility is designed to produce thick walled and high strength pipes that are applicable for the newest and advanced drilling technology used in shale gas production.
The facility is planned to be built in Texas or Oklahoma depending on the US incentives. One third of the investment will be funded by Borusan Mannesmann's own capital, while for the remaining two thirds, long-term credit facilities and incentives are being considered.
Once fully operational, the facility scheduled for commissioning in the second half of 2014 is expected to create a turnover of $500-600 million depending on steel prices. Currently, the company's turnover stands at $800 million. With the investment in question, Borusan Mannesmann which has a two percent share in the total US OCTG market is estimated to double its shares. The annual energy pipe consumption of the US is 10 million mt, including 6 million mt of OCTG pipes.
Borusan Mannesmann said that one of the reasons behind the OCTG pipe facility investment is that the US has started to produce oil locally instead of importing it, adding that the investment is its first step to becoming a global company.
According to the 2009 data, shale gas production in the US accounted for 14 percent of the country's total natural gas and oil production, while by 2035 the share is expected to increase to 46 percent.