CONNECTINGTHE KINGDOM Having recently been awarded of Saudi Aramco approval for themanufacture of specialised line pipe capable of transferring sourservice materials, Global Pipe Company (GPC) has taken a majorstep forward in its growth plan since its last interview with EuroasiaIndustry in 2013. Sarah Pursey speaks to Mr Ahmed Hamed AlKhonaini, Managing Director, to learn how GPC’s enhancedmanufacturing capabilities have not only enabled the company to secure new supply agreements, but also to emerge as one of only a few local manufacturers capable of meeting the increasingly demanding technical requirements of KSA’soil & gas sector. Written by Marius Goubert. ‡

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Representing a joint venturebetween Erndtebrücker Eisenwerk GmbH& Co. KG (EEW), a highly specialisedand experienced German manufacturerof submerged-arc welded (SAW) pipes,Saudi Steel Pipe Co. (SSP), Pan GulfHolding (PGH) and Mr Ahmed H AlKhonaini – one of the leading industrial-ists in Saudi Arabia’s Eastern Province –Global Pipe Company was established inlate 2010 in Jubail Industrial City with atotal investment in excess of SAR 660 mil-lion (US$176 million). Founded with aview to manufacturing thick-walled steelpipes for the Saudi Arabian and GCCmarkets – where such products had tra-ditionally been imported – the companycommenced operations from its manufac-turing facility in the last quarter of 2012and, after an initial trial production phase,completed its first pipe delivery in March2013 to a water treatment facility in Jordan.During the second quarter of 2013, GPCsucceeded in gaining approval from theAmerican Petroleum Institute (API) and,on 25th November 2013, the company’spipe mill was awarded official supplierstatus by Saudi Aramco for non-Sourpipes and structural tubular..Intending to serve the oil & gas sector as

well as offshore and structural applications,GPC now specialises in the production oflarge-diameter, heavy wall thickness pipesin two main categories: longitudinal sub-merged-arc welded (LSAW) line pipeswith outside diameters ranging from 16-62inches and thicknesses of 8-51mm, andstructural tubular, large-diameter pipes ofup to 200 inches with thicknesses of up to130mm. The company’s annual productioncapacity stands initially at an impressive200,000 tonnes, which incorporates170,000 tonnes of line pipes and 30,000tonnes of structural tubular pipes. Whilethe majority of its line pipe production isaimed at oil & gas applications, GPC alsohas the capacity to manufacture productsfor the water sector; the petrochemicalindustry, and the drilling sector, and primarily supplies its structural pipes to offshore platforms.

Sweet and sour Underpinned by a commitment to supplysuperior quality products in compliancewith its customers’ specifications andrequirements, GPC has continued tomake rapid progress in the two yearssince last speaking to Euroasia Industry.In addition to ramping up its operations

to full capacity and implementing a newtwo-shift system, the company has alsomoved to enhance its competitivenessby filling a visible gap within the localSaudi Arabian market for high-end indus-trial pipe products and value-added serv-ices. “We have implemented a series ofimportant changes over the last two years,”begins Mr Ahmed Al Khonaini. “As wellas increasing our production capacity, wehave also been working on a strategiclevel to move away from the production ofmore low-end, commodity pipe products –an area where we see high competitionfrom producers throughout China andIndia – to focus instead on highly spe-cialised products that are primarily usedin the transfer of sour service materials.”Characterised by high levels of carbon

dioxide (CO2) and hydrogen sulphide(H2S), sour gas reserves were historicallyleft underdeveloped throughout theMiddle East due to the technical chal-lenges and high cost associated with theirextraction and processing. Yet, in the wakeof recent technical advances, sour gasreserves are increasingly being revisitedas potential supply sources in areas withhigh demand for natural gas. Indeed, asMr Khonaini reports, the Middle Eastregion is particularly interested in tappingthe potential of these challenging uncon-ventional gas reserves: “A few years ago,demand for pipelines capable of transfer-ring sour materials was limited within theMiddle East. This is now changing, how-ever, particularly within areas such as AbuDhabi, Kuwait and Saudi Arabia wherethe trend is very much going in the direc-tion of sour materials which require theuse of more resilient pipeline networks. “Overall, this has provided GPC with

an opportunity to diversify from its tradi-tional line pipe business, and begin pro-ducing high-end products manufacturedfrom specialised steel, which is currentlyimported from Japan and Europe. Themain challenge with sour service mate-rial is that it cannot be transferred usingnormal steel pipes, and developing pipelineinfrastructure with sufficient resistancerequires a different approach to both steelproduction and pipe manufacturing – espe-cially with regard to the welding process.Indeed, only a limited number of steelmills are capable of producing the rawmaterials from which these pipes are man-ufactured, and steel suppliers are requiredto gain approval from Saudi Aramco beforethey can deliver those products to the local ‡

market. It is a similar situation for pipemanufacturers, and Saudi Aramco pro-vides producers with the opportunity togain two levels of approval: the first is fornon-sour or sweet, which GPC gained inNovember 2013, while the second is forsour service materials. Saudi Aramcorequires manufacturers to produce a cer-tain quantity of non-sour material in-linewith Aramco’s quality specifications beforethey are eligible to attain the second levelof approval. Making this crucial progres-sion is essentially what we have focusedon for the last two years, and we are nowfinalising the qualification process forsour service material and on track togain official vendor status from SaudiAramco within a matter of weeks.”

Building new networks GPC’s approval by Saudi Aramco for thesupply of sour service material is partic-ularly notable given the fact that GPCrepresents a comparatively new playerwithin the domestic pipe manufacturingsector. Crucially, it also means the com-pany now occupies an exclusive marketposition shared by only a limited numberof global producers. “Around 12 pipe man-ufacturers worldwide – including GPC –are currently certified by Saudi Aramcofor sour services,” confirms Mr AhmedAl Khonaini. “GPC is therefore in astrong position to meet growing demandfor such pipe materials and we continueto regard product diversification as a corepart of our development strategy. Indeed,in addition to expanding our range toaccommodate sour service materials, wehave also embarked on a new venture tosupply value-added services to the localmarket – specifically related to the supplyof well casings for OCTG (oil countrytubular goods) applications. In 2013, thepipe market situation was significantlydifferent to what we see today – backthen, few supply contracts were beingawarded. As it was not possible to acquirenew projects, we began assessing the pos-sibility of further diversifying our portfolioby supporting Saudi Aramco’s upstreamdevelopment activities through the supplyof the well casings used in drilling. “But while upstream development is

very much based around pipes, we realisedthat to supply the necessary products wewould also have to provide the associatedconnectors enabling these pipes to belinked together to form a drill string: essen-tially a column that transmits drilling fluid

and torque to the drill bit. These stringshave a depth of around 1000 feet andeach well contains approximately 40Joints. Yet, while it was possible for us tomanufacture the pipes, the associatedconnectors represent complex productsthat are currently manufactured by asmall number of highly qualified pro-ducers. To overcome this, wqualifiedand approved vendors and formed asupply agreement whereby GPC manu-factures the mother pipe and our part-ners supply the associated connectors.“Since 2014, we have been working

on the installation of a dedicated weldingline using machinery sourced fromWELDEC GmbH – part of the EEWGroup. The erection, commissioning andtesting of this new line is now complete,and we recently concluded an internalqualification process with our selectedpartners to confirm that GPC is capableof welding these connectors in accor-dance with our partners’ quality specifica-tions.The side survey for this new weldingline was held on 02nd of November 2015by Saudi Aramco’s drilling department. Wehave received positive feedback after thevisit and we expect to close the approvalprocess during the first quarter of 2016.Once finalised, this new line will notonly open up a significant new marketfor the business, but will also provide uswith a valuable source of revenue thatwill enable us to endure any disruptionsthat we experience within our line pipemanufacturing business.”

Projects of prestige Given the sheer scope of its operationsand development activities, Saudi Aramcohas provided GPC with multiple oppor-tunities to diversify its capabilities to meetthe organisation’s changing and increasinglycomplex requirements. Indeed, while GPCremains committed to expanding its pres-ence throughout the wider GCC, the com-pany has also found itself particularly wellplaced to capitalise upon Aramco’s growingdemand for its productive and technicalabilities, which, in addition to the supply ofwell casings for upstream development, hasalso led to a number of new supply agree-ments as Aramco embarks on a nation-wide development of the Kingdom’spipe-line infrastructure. “While we are working with other NOCs

(national oil companies) throughout theGCC, many of those companies require afive-year operating track record, and so

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diversifying our customers and growingour presence throughout the regionremains an ongoing process,” continuesMr Ahmed Al Khonaini. “Yet, our contin-uing supply agreement with Saudi Aramcois providing us with clear growth opportu-nities as well as an excellent point of refer-ence which has been further strengthenedfollowing our acquisition of a number oflarge-scale supply agreements.” The mostprominent of those contracts is theShedgum project: a 150.6km, east-westgas pipeline connecting the Shedgum gasprocessing plant with the Yanbu export ter-minal. GPC has been contracted to supplya total of 84,000MT (metric tonnes) ofsteel pipes made of API 5L Gr. X65 PSL2,with a diameter of 32 inches (812.8mm)and wall thicknesses of 26.79-31.75mm.More recently, GPS secured a major

new supply agreement with Aramco foran extension of Saudi Arabia’s MasterGas System (MGS). Dating back to the1970s, MGS was initially designed tomonetise Saudi Arabia’s gas reservesthrough the implementation of a country-wide network of pipelines and gas-pro-cessing plants. Those facilities have sinceenabled the Kingdom to produce signifi-cant quantities of ethane, which is usedas a petrochemical feedstock, and LPG,which is primarily exported, and dry nat-ural gas, which is supplied to the domesticpower, desalination and petrochemicalindustries. Growing domestic demandfor natural gas, particularly regarding thedelivery of feedstock to petrochemicalplants, has driven consistent expansionof the Master Gas System over the yearsand, as Mr Ahmed Al Khonaini informs:“GPC has been contracted to supply mate-rial for a forthcoming expansion of the net-work, which will involve implementingextensions within the eastern, central andwestern regions of Saudi Arabia. In total,500,000MT of steel material is requiredand, out of this, GPC has been contractedto supply 293,000MT, which is around60 per cent. The total length of the newpipeline, meanwhile, is around 1,000kmand we will supply the necessary materialsto complete 550km of the new pipelinenetwork. The project is anticipated to beginbetween April 2016 and will keep is busyfor around 12 to 14 months.”

Prosperity in the pipeline Given the sheer scale of GPC’s currentworkload, the company certainly has goodreason to look towards the future with

a sense of optimism and, as Mr Khonainiinforms, the management team is cur-rently assessing the possibility of furtherexpansions to cope with the growinglevel of demand from the Saudi Arabianmarket. “Having a full order book for thenext two years is a very good position tobe in, particularly when you consider thecurrent global economic climate. If welook at other pipe producers worldwide,the situation is profoundly different. “The company is certainly well placed

within the local market and has secureda solid reputation in a remarkably shortperiod of time. If we take the Shedgumproject, for example, there was a greatdeal of surprise when it was awarded toa new mill like GPC, but the challengenow is to prove that we can successfullymanage an order of this scale and makeit a success. Of course, we then have tomeet our obligations for the Master GasSystem project but, overall, GPC hasproven itself as a reliable partner that iscapable of taking on these kinds of large-scale developments.”As GPC looks to the future, the com-

pany will continue to reinforce its repu-tation for quality and reliability, saysKhonaini, and will also focus on diversi-fying its range from low-end to high-endindustrial pipe products, in addition to pro-viding value-added services. “This is atthe core of our development strategy –and clearly reflected by our new approvalfor sour service material and our newventures into sour service materials andsupply of well casings to Saudi Aramco,”he emphasises. “Even though the marketremains volatile and the sustainability oflong-term demand is difficult to predict,these investments give us confidence forthe future and, once we have built uponour successes here in Saudi Arabia, wewill be in a position to target new opportu-nities throughout the wider GCC and gointernational,” he concludes. o