Izhorsky Trubny Zavod - Severstal

Izhorsky Trubny ZavodIntegrated complex on production of big diameter pipes30 November 2007

2Agenda» The main producers of Large Diameter pipes» Demand forecast on Russian Large diameter pipes market» Constant purchases of gas and oil companies for repair works» ITZ Basic information» Summary» Geographic position of the mill» Dynamics of project development» Pipe welding mill technological operations scheme» Pipe coating mill technological operations scheme» Primary advantages of the project» Priority projects of key consumers» Certificates

3The main producers of Large Diameter pipesAvailable capacity(thousand tons per year)TotalIncluding 1020 –1420 mmdiameter withouter coatingGrade ofresistance byAPI 5LMax of wallthickness, mmMax of length ofpip, mType of weldCapability forapplying ofinner coatingVykusinsky steel mill1400400up to Х 1004812One weldYesVolzhskiy Trubny Zavod965500up to Х 802212spiral weldIn projectChelyabinskytruboprokatny zavod1580400up to Х 802412One weld – up to820 mm; Twowelds – up to1220 mmNoHartcizskytruboprokatny zavod1500600up to Х 702812Two weldsYesIzhorsky Trubny Zavod450450up to Х 1004018One weldYes

4Demand forecast on Russian Large diameter pipes market(thousand tons)Pipe market ∅ 1020-1420 mmPipelines maintenance (inc. repair works)New projects in oil and gas industries250020001500100050002005 2006 2007 2008 2009 2010Gas pipes (new projects)Oil pipes (new projects)Gas pipes (repair works)Oil pipes (repair works)

5Demand forecast on Russian Large diameter pipes marketEstimate demand,Thousand tons200520062007200820092010Gas pipes, total6508501400200020002775Oil pipes, total360685525815490490Total101015351925281524903265» Under the realization of planned gas and oil projects (inc. repair works),expected demand growth on large diameter pipes since 2006, will exceed3.2 mln. tons in 2010» The most dynamic developing segment – 1220 -1420 mm diameter pipes» The higher demand is expected in gas industry

Constant purchases of gas and oil companies for repairworks6Gas companiesOil companiesmore than 33years15%21-33 years25%less than 10years23%more than 33years38%less than 10years5%10-20 years20%10-20 years37%Set time-limit for longdistance pipelines operationin Russia is 33 years21-33 years37%» Length: 153 thousands km (94,3thousands km)*» Total weight: 50 mln. tons (43,3 mln.tons)*» *(1020-1420 mm assortment)» Протяженность: 49 thousands km(21,1 thousands km)*» Total weight : 12 mln. tons (9,6 mln.tons) *» *(1020-1420 mm assortment)

7Basic information» Mill-5000 can produce steel plates with thickness 10 …. 300 mm and width 1500 … 4800mm, mostly for the nuclear power plants, petrochemical industry and other.» The made renovation of Mill-5000 let the repetition work plates for the pipe production» Maximum rolling force on Mill-5000 is 9 thn. tn.» Dimensions of finish products:» Dimensions of strip: Dimensions of plates :» thickness, мм 10…..50 thickness, мм 51…..300» width, мм 1500…..4600 width, мм 1700…..4800» length, м 4…..24 length, м 4…..15» weight, tn up to 32 weight, tn up to 60» Steel grades:» breaking point up to 1200 MPа» strength class up to Х100

8Basic informationScheme of renovated objectsLiquid-ballfurnaceContinuousfurnaceHeating furnaces complexThroatshears forcross cuttingUSTPlaning machineAcceleratedcoolingeuipmentMillstandFluidcleanerDouble sidetrimming shearsSide trimmingshears equipmentHeat cutting equipment

10Geographic position of the millBaltic SeaFinlandEstoniaSaint-Peterbugr» The mill is situated in Kolpino, Saint-Peterburg on the area of JSC “IzhorskiyeZavody”Moscow» The production is situated in the areawith developed transport infrastructure(seaport, river ports, railway stations)Saint-PeterbugrKolpino

11Dynamics of project development» January, 2004 – contract with SMS Meer GmbH (Germany)» March, 2004 – the beginning of works on the building site of the millMarch, 2004

12Dynamics of project development» February, 2005 - signing up the contract for producing, shipping andinstallation of the equipment for the mill of outer coatings with CRC-EvansInternational Pipelines, Inc. (USA)» March, 2005 – signing up of the agreement between the governor of Saint-Peterburg V.Matvienko and general director of “Severstal-group”A.Mordashov about strategic alliance between Severstal and Saint-Peterberg, where project was named as a strategic invest project №1 inSaint-Peterburg and “Severstal-group” and “Izhorsky trubny zavod”received the status of strategic investors of St. Petersburg till 31.12.2009.» August, 2005 – General director of “Gazprom” daughter company“Gazcomplectimpex” Valery Golubev and Chairman of Directors Border of“Izhorsky Trubny Zavod” Igor Kostin have signed the cooperationagreement between companies on period 2006-2007. The aim ofagreement is providing of Gazprom by gas pipes in diameters 1020-1420mm.

13Dynamics of project developmentOctober, 2005 – beginning of shipment and settling up of the equipmentDecember, 2005 – signing up the contract for producing, shipping and installation of the equipment for the mill ofinner coatings Selmers Technology (Netherlands)

14Dynamics of project development14th of July, 2006 – Commissioning of the mill took place at presence of the President of the Russian FederationPutin V.V.

Dynamics of project development15

16Pipe welding mill technological operations schemeSetting up a steelplate to a millMarking a plateCleaning of innersurface of pipeInner seam inspectionPipe ends processingPipe cleaningWelding oftechnological slatsInner seam weldingOuter seam weldingDecreasing strengthening ofinner seamHydraulic testingFinal pipe acceptance,weighing and markingPlate edge processingMarkingOuter seam inspectionSelection of trialsPipe cleaningCleaning after testingMagnetic-particletestingPlate edge bendingTechnological seaminspectionTechnological slats cuttingRepair of pipes X-ray inspection 1 Expand of pipeUltrasonic testing 2Beveling pipe’sendingsTubular billetformingTechnological seam weldingUltrasonic testing 1Pipe cleaningUltrasonic testing ofendings of the pipeX-ray testing of pipeendings

17Pipe coating mill technological operations schemeInspection test of the pipeInspection of surface test ofpipe surfaceChromate treatmentDielectric Coating continuousnessdielectriccontinuousness coating test testCoating repairInspection test of thepipe’s surfacePipe expulsionPipe drying and heatingin gas furnaceInspection of coatingPipe markingPipe degreasingPipe surface dedustingInductive heatingCleaning of pipeendingsPipe drying and heatingin gas furnaceOuter surfaceshot-blast cleaning 2Outer coatingWater removalOuter surfaceshot-blast cleaning 1Inspection of outer surfacePipes division(coating cutting)Cooling of coating

18Primary advantages of the project» Mill “5000”One of the advantages of the project is the closeness of the mill “5000” of JSC“Severstal”. This allows to create continuous technological chain: Severstal’s slabs– mill “5000” plates – ITZ pipes, to fit key customers requirements. For today mill“5000” is already producing steel plates of grades X70. By now there are workingout technologies of producing steel plates of grades X80, and further – X100.» Pipe lengthCompetitive advantage of Izhorsky trubny zavod (pipe mill) is a possibility ofproducing unique product for Russian oil and gas transportation companies –pipes with length of 18,3 m, what allows to decrease costs of trunk pipelinesbuilding.» Technological equipmentProduction and shipment of equipment is carried out by the leaders of worldmachinery building industry:• for pipe welding equipment – by SMS Meer GmbH (Germany);• for outer coating equipment – by CRC-Evans Pipeline International, Inc (USA);• for inner coating equipment – by Selmers (Holland).» TransportationWell developed infrastructure in the region (seaports, railways, highways) is alsoone of the advantages of the project.

19Priority projects of key consumersCompanyProjectLenght,kmNumber oflinesTotal lines lenghtDiameter, mmTotal weight, thous.tonsRealization timeAverage requirementthous. tons/yearGas pipelinesGazpromSRTO-Torzhok160011600142010002004 - 2007250GazpromSEG (Gryazovec - Vyborg)91721834122012002006 – 2011200GazpromSEG (Gryazovec - Grayfsvald)118922378122022002007 – 2010550GazpromYamal - Torzhok245124902142030002010 – 2015500GazpromSHGKM - Teriberka5632112610679602008 – 2010320GazpromTeriberka - Volhov136511365142011002010 – 2013275Gazprom/TNK-BPKovyktinskoe - Zabaykalsk200012000142016002008 - 2010530Oil pipelinesTransneftBTS (3 turn)708170810203202005 – 2006160TransneftTayshet - Skovorodino20001200012209752006 – 2008325TransneftSkovorodino – Perevoznaya bay21681216812208702008 - 2010290» Starting of the most of these projects planned on 2006-2010» Main part of gas projects consider to use 1420 mm pipelines» Main part of oil projects consider to use 1220 mm pipelines

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