Oil prices are rising and higher U.S. production can only be beneficial to us, the head of strategy at Russian pipemaker TMK told CNBC Thursday.
“The sector we’re in is very dynamic now with the oil price at $70-plus for WTI (West Texas Intermediate), we’re seeing very strong drilling activity and the U.S. does not produce all the products it needs so that (means) a lot of imports,” Vladimir Shmatovich said at St. Petersburg International Economic Forum (SPIEF).
TMK’s head of strategy said higher oil prices and higher U.S. production would help the pipemaker, which makes tubular products for the global oil and gas industry, but he conceded that “the oil price is not everything.”
“Some companies have a bigger cushion (to protect against fluctuating oil prices) but some of them are on a very thin edge and when the oil price moves they can be in very big trouble. But our business is different and related to manufacturing as opposed to pure services, so there are higher barriers to entry,” he said.
“I’m not going to say that it (business) doesn’t depend on oil prices, because it does … But to produce oil one needs pipes.”
TMK is Russia’s largest maker of steel pipes for the oil and gas industry. It has the world’s largest steel pipe production capacity and its pipe shipments totaled 3.78 million tons in 2018.
It employs 42,000 employees around the world, exports to 80 countries and has 27 production sites around the world, 12 of which are in the U.S. and Canada where its TMK IPSCO subsidiary is located. Its American division has 2,000 employees and 1,390 kilo tons of pipe making capacity. Revenue in its American division was $994 million in 2017, on sales of 670,000 tons of product.
Still, being a Russian company operating in America with diplomatic and economic relations between the two superpowers at a low ebb can’t be easy.
International sanctions, first imposed in 2014 for Russia’s annexation of Crimea and its perceived role in a pro-Russian uprising in eastern Ukraine, have hit the country’s banks, energy and arms sector by preventing them from being able to access funding in U.S. dollars. The sanctions have also restricted the Russian energy sector’s access to technology needed for oil and gas exploration.
Shmatovich said his company had not experienced any problems, however.
“Political rhetoric doesn’t make it easy, however we feel quite comfortable and we tend to be quite local. In the U.S. we are in eight states, and we are part of local communities and we have very good relationships with our American counterparts so we don’t really feel it there much.”
The interconnected nature of the industry could do with a calmer and more “benign” business climate, he added.