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Sumitomo Corporation Contributes to Maintaining a Stable Energy Supply through its Oil Country Tubular Goods Business

July 2010

Concentration of about 60% of the world's crude oil reserves

Various studies indicate that about 60% of the world's proven crude oil reserves is concentrated in the Middle East. It is no exaggeration, therefore, to say that the global energy supply is largely dependent on the stability of the handful of Middle Eastern countries that constitute the world's largest crude oil producers. Concerns are often raised about the possibility of the world's crude oil running out in the near future. Given the current rate of production, however, most Middle Eastern crude oil reserves are expected to last for at least another century, and above all, Iraq's should hold out for the next 300 years or more. Although in recent years the development of new resources known as shale gas and oil has become widespread, mainly in North America, the Middle Eastern countries will nonetheless retain their powerful position on the world stage for years to come.

The ever-changing city of Dubai is a product of the prosperous Middle East crude oil industry.

Sumitomo Corporation plays a role in maintaining the stable supply of energy coming out of the Middle East through its oil country tubular goods (OCTG) business. OCTG are the pipes used to draw underground oil and gas to the surface. Buried deep under the ground and subjected to unimaginable pressure, they have to be extremely tough. Since subterranean conditions widely differ from place to place, the pipes must also be customized according to their specific purpose, the location and the particular needs of the customer. OCTG operations are therefore heavily dependent on both personnel with high technical skills and on high quality products.

By successfully meeting with or exceeding these kinds of stringent requirements, Sumitomo Corporation has managed to make significant achievements in the OCTG industry.

Oil and gas in the Middle East are being delivered to all over the world using various technologies.

Implementing a supply chain management system that enables comprehensive provision of high quality services

With headquarters in Tokyo and major sales bases in America, Britain, Singapore, Dubai and China, Sumitomo Corporation has provided the global market with a wide variety of OCTGs based on its original supply chain management (SCM) system.

Sumitomo's global exports consist of CRA (high alloy), manufactured by NSSMC, and other high-quality OCTGs. Well management covers a number of elements, such as just-in-time deliveries, proper maintenance & inspection, inventory control of OCTG along with numerous numbers of accessories, all of those are performed based on careful estimation and monitoring of OCTG demand forecasts as well as well conditions. Sumitomo Corporation has developed an SCM system that provides comprehensive well management services tailored to the diversified needs of customers. The company's unrivaled know-how has consistently brought about a high level of customers trust.

One example of the successful implementation of Sumitomo's SCM system is in Oman, a mid-scale oil-producing Middle Eastern country where oil development used to be conducted by Petroleum Development Oman. It was said that the question of how to effectively control their OCTG inventory was still open, with countless pipes being left unused in the desert.

Sumitomo Corporation brought in its SCM system in 2002 to provide comprehensive services, including inventory control, and since then has made a significant contribution to oil development in Oman. Similar examples can be found in 21 contracts around the world. The company's collective expertise has been brought together in an SCM promotion outfit established in Houston, the United States, and utilized in numerous ways in SCM projects implemented all over the world.

UAE yard lined with OCTG destined for Middle Eastern countries. The goods are manufactured by Nippon Steel & Sumitomo Metal Corporation (NSSMC) using its unrivaled world-class technology.

Focus on technical consulting

When it comes to oil and gas development, successful business models cannot be "copy and pasted" to different locations, due to the wide variation in conditions such as scale, depth, inclusions, pressure, temperature and so on among sites. Know-how of an SCM system can be utilized for effective business management, but high-level technical skills are also necessary for the design and operation of wells best suited to each drilling environment. Sumitomo Corporation deploys regionally specialized consulting engineers to sites all over the world.

It is the mission of these consulting engineers to become a partner of oil & gas companies, to serve as a go-between or "translator" with Sumitomo Corporation, which provides the high-quality steel pipes, and to propose the optimal well design for each unique environment.

In Middle Eastern countries, well depths range from 1,000 m to 5,000 m at the deepest. In order to secure safety under the harsh conditions, high quality OCTG and associated services are indispensable.

Through its steel pipe provision operations, Sumitomo Corporation further assists oil & gas companies both commercially and technically, with the promotion of SCM facilitating maximum results from the minimum investment, and with consulting engineers making optimal technical proposals for the respective well applications.

Sumitomo Corporation Middle East FZCO staff discussing a Middle East business strategy. This company plays a key role in Sumitomo's tubular business strategy for the entire Middle East and North Africa region.

Meeting with the new trend for nationalisation

As in the case of Oman described above, in Middle Eastern oil-producing nations, it is state-run companies that import high-quality OCTG for oil development. One of our pillar strategies is to meet with or exceed various needs of these state-run companies.

In contrast, trends toward nationalization or domestic manufacturing have become apparent in the Middle East over the past few years as countries try to nurture a domestic industry by creating domestic employment in OCTG manufacturing and associated services. It is obvious that another pillar strategy will be needed to continue to cope with & respond adequately to changing trends in Middle Eastern nations.

Middle Eastern countries are not a homogenous bloc, however. They are different in every respect, including laws, culture, trade practices and others. This means responses to trends toward nationalization must be equally unique. In this aspect, too, it is not possible to apply a "copy and paste" strategy. Sumitomo’s double-pronged strategy supported by its SCM system and consulting engineers, however, allows the company to stay agile and flexible in its responses.

A stable supply of Middle Eastern crude oil is also a significant issue for global energy policy. The mission is so challenging that not a single country, nor even the oil-producing nations acting together, can fulfill it by themselves. In order to secure a stable oil supply, people must collaborate across borders and cultures, sharing their knowledge and technologies. Seeking to make a meaningful contribution to the global community, Sumitomo Corporation is very proud to be involved in this type of cross-border collaboration in the far off region of the Middle East.

Oil and gas drilling services must be tailored to various geographical conditions, such as in deserts and in mountains.

Related Tag

  • Metal Products Business Unit
  • Oman
  • Metal Products

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