October 12, 2008

OMK\'s Vyksa to supply 25% pipes for Nord Stream project

Vyksa Steel Works the flagship enterprise of Russian pipe and metals holding United Metallurgical Company in a released said that it have won a tender to supply pipes for the first strand of the 1,200 kilometer Nord Stream gas pipeline being built from Russia to Germany by Nord Stream AG.

The other participants in the tender include Nippon Steel, Sumitomo, JFE and Severstal's Izhora Pipe Works.

Vyksa would provide the necessary capacities for manufacture and delivery of the required pipes in 2008 and 2009. Nord Stream secures the pipes for the first line at the current price level. At the same time, the expected development of the steel market was taken into account to also provide for security on the contractors' side.

Ms Irina Vasilyeva spokeswoman for Nord Stream AG said that “Judging by similar projects, the cost of pipes accounts for around 40% of a pipeline project's budget. In this case, the cost of steel, which has trebled in the last three years, would be of key significance when calculating the final cost of the contract. The cost of the contract generally meets our expectations. The committee of Nord Stream shareholders approved these costs at a meeting.”

For the second pipeline, there will be a completely new pipe supply tender. The number of technically qualified pipe mills is expected to increase.