Wednesday, June 12, 2013YOUNGSTOWN, Ohio – “WOW!” That’s the word Vallourec Star executive Skip Herald chose to “sum up a great day” at Vallourec’s new pipe mill here as he greeted reporters and community leaders during a news conference that served as a prelude for tours christening of the plant.
Herald, managing director of Vallourec’s North American division for oil country tubular goods, connected the “outstanding timing” of his company’s “bold decision” in 2009 to invest $1.1 billion here to the changing technology employed by the domestic oil and gas industry. The combination of oil and gas companies being able to drill horizontally and advances in hydraulic fracturing enabled exploration of shale gas to become more economical -- and demand to grow for the type of pipes Vallourec produces, he said.
“It’s a very challenging environment,” he explained of deep exploration in shale plays like the Utica/Point Pleasant formation in eastern Ohio. “You have to drill 5,000 feet vertically, and another mile horizontally, and in order to get that drill stream to the bottom, you have to be able to rotate.” The process takes place under very high pressure -- "high load and torque, and that's where our premium connections come into play."
“As we looked at the market in the 2008 time frame, we saw the market shifting in this direction for small diameter tubes,” Herald said. “We knew these opportunities were there.”
That was “good advice from good management,” affirmed Philippe Crouzet, CEO of Paris-based Vallourec.
As Crouzet explained, the North American oil and gas market “is very different than all the other markets we participate in the world. Here you have hundreds of players…moving very fast with lots of demands. The benefit of being domestic in such a market that is moving so fast, changing so fast, was really the point that convinced me, when the North American team came to me with this concept -- to build a new mill in Youngstown.”
Vallourec reports annual revenues of $6.7 billion and employs 23,000 at its plants in 20 countries. Its North American unit contributes about 29% to the company's total sales and when the new mill here reaches full capacity, domestic sales could account for "one third" of Vallourec's revenue, Crouzet said.
The new pipe plant, for which ground was broken three years ago, is a Danieli fine quality mill, said Joel Mastervich, president and chief operating officer. The mill is capable of producing tubing as small as 2 3/8 inches and has a capacity of turning out 500,000 tons per year. It delivered its first pipe in December and will ramp-up throughout 2013.
Mastervich reviewed the economic impact of the new mill, the most heralded development project in the Mahoning Valley since General Motors built its Lordstown complex decades ago.
“In 2012, we spent $250 million with local suppliers,” he noted. Of the 350 people working at the plant, 90% live in the five-county region, and collectively paid $250,000 in municipal income tax last year.
Vallourec has worked to remove blight and clean up the Route 422 corridor to make “the visitor impression of our new plant much more positive,” he added.
Still, the question he’s asked the most, Mastervich said, is “Why Youngstown? Why Youngstown?”
He cites the skilled workforce, “the logistical opportunities with respect to rail and highway access,” the great cooperation from all levels of government and “the great response from the business community.”
With the new mill coming on stream, Vallourec says its Youngstown site now offers the full range of products and services necessary for all hydrocarbon production, and in particular the shale developments. The integrated site includes a steel mill, a mill specializing in medium diameter tubes and the new mill, which specializes in the manufacture of small diameter tubes.
“We are on our way to becoming the first fully integrated site in the United States,” Mastervich said.
“This really does strengthen Vallourec’s position in the world.”
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CLICK HERE to download Vallourec's news release about its new mill.
Copyright 2013 The Business Journal, Youngstown, Ohio.
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