Noah and I had the opportunity to interview the Prince of Pipes, Piotr Galitzine, last week at the American offices of TMK IPSCO, a Russian owned American company with 11 (soon 12) plants in North America.
Galitzine, a Prince who is a direct descendant of the Russian czars, was friendly and expansive as he gave us an insider’s view of the energy business where three quarters of IPSCO’s orders come from.
Piotr wore the pinched collar shirt of a European nobleman, but talked like an American CEO, with a little bit of St. Petersburg in his voice.
His father ended up in Peru where Piotr was born in 1955, then moved to New York City in the 1960s. Piotr went to a U.S. prep school and MIT and ultimately gravitated to Russia working for the German engineering goliaths, Mannesmann and BASF. Being a Russian surely helped his business career, but I can imagine the Royal blood thing annoyed some of the unreformed Communists he encountered.
When TMK bought IPSCO a couple of years ago and made Galitzine head of the company they got American capacity, but perhaps of more value was the intellectual property that they are beginning to transfer to the Russian operations. TMK announced on May 21 that they had made a shipment of casing to Gazprom, the Russian oil and gas behemoth, with ULTRA-FJJM Premium Connections developed in the U.S. but manufactured at the Orsky Machine Building Plant in Russia.
One of the first things the Prince told us as we began the 45-minute interview with him and Dave Mitch, his newly hired Chief Operating Officer who came over from U.S. Steel, was that IPSCO was bringing Six Sigma quality techniques to TMK in Russia.
According to Galitzine, the purchase of IPSCO is the largest direct investment by a Russian company in the U.S. to date. Russia means business in oil and gas, and North America is the place you want to be today.
The oil sands in Alberta, Canada, have as much recoverable oil as Saudi Arabia by some estimates. I asked Piotr where TMK IPSCO fits in with that oil, because oil sands are more a mining operation than drilling. He explained that the company provides the pipes that shoot hot steam into the rock thus making the liquids easier to extract. They also make the pipe to transport gas from Alaska to Alberta and the tubular goods to ship product out of the oil sands area. They are also building a tubular goods plant in Edmonton, Alberta, to serve that market and North Dakota’s Bakken Oil Field that is quickly becoming the biggest producer in the U.S.
The natural gas coming to the Alberta fields is vital today, but Galitzine thinks that a compact nuclear reactor or two are the long-term answer for providing power to the monster oil mines of Alberta.
The Prince feels that the United States will be a net exporter of hydrocarbons by 2020. (This explains the big fight over the Keystone Pipeline. When Keystone is approved and built, providing inexpensive access to the oil sands and North Dakota, alternative energy will have no security or balance of payments significance and therefore will become the luxury of the elites who still want to tilt at the global warming bugaboo. Thus – GAME OVER for the GREENS, and they know it. The environmentalists will scream “Keystone catastrophe!” at the top of their lungs.)
We asked Galitzine about the importance of horizontal drilling for gas and oil and whether it makes expensive deep water drilling unnecessary. He told us that the worldwide demand is insatiable and we need every source we can find. The only place where net production is rising today is North America, though that will change when the giant Brazilian finds start pumping.
The next big thing, according to Galitzine, is LNG (Liquid Natural Gas). He says by 2015 the U.S. will be exporting LNG in gigantic tankers. I thought the logical place to sell American LNG was to Japan, which just shut off its last nuclear reactor. Galitzine feels differently. Because of the huge shale gas fields in Ohio, Pennsylvania and New York, he thinks the big customer will be the United Kingdom. Any way you look at the hydrocarbons today it appears ugly for the coal mines. Coal usage is dropping dramatically in North America. I think Warren Buffet may have muffed it when he bought Burlington Northern Railroad for $27 billion, because a big piece of its business is shipping coal from Montana to the power plants of the Midwest and Eastern U.S.
IPSCO is completing a $17 million tubular goods facility in Odessa, Texas, a fitting place for a Russian-American firm to invest. Though the Prince has lived in America much of his life, he hadn’t heard of the wonderful film and TV show “Friday Night Lights” about life and football in Midland-Odessa, Texas. But I imagine Prince Piotr Galitzine, the astute businessman of the world he is, checked it out on the Internet after we left.
Question: Do you worry about global warming?