Thursday, September 14 2006 17:28 Hrs (IST) - World Time -

New Delhi: Tata Steel is considering venturing into oil and gas pipeline manufacture as it expands capacity for precision and structural tubes to cash in on the construction boom.

With the demand for oil and gas pipeline infrastructure expected to rise in the country and overseas, Tata Steel sees good potential for diversification of its tube manufacturing activities, said Vivek Kamra, executive in-charge of tubes.

"We are looking at financials for undertaking the manufacture of pipes for oil and gas (transportation). The proposal has not been finalised yet," said Kamra on the sidelines of a conference organised by the Confederation of Indian Industry (CII) Thursday.

The average gestation period for the foray is expected to be around three years.

Kamra sees 300,000 tonnes capacity as viable for venturing into oil and gas pipeline manufacture. Currently, only a few major companies like Welspun and Jindal cater to the demands of the oil and gas pipeline sector.

"In tubes we are focusing on three segments - precision tubes, structural tubes and oil and gas tubes. In precision tubes we currently have capacity for 50,000 tonnes and are investing Rs.1.2 billion (in Jamshedpur) for raising capacity to 125,000 tonnes by next year. We have already acquired the latest high end tube making machines," the official said.

Tata Steel, a part of the diversified conglomerate Tata Group, sees major growth coming from both domestic and overseas markets with India emerging as a major source for auto components, striding ahead of China in cost and quality competitiveness.

The company, which hardly exports any of its precision tubes, is now looking at the overseas market to offtake 5-10 percent of its production by 2008-09 when it is expected to reach 500,000 tonnes.

From producing 270,000 tonnes precision tubes in 2005-06, the company is planning to gradually increase its output to 350,000 tonnes by the end of 2006-07 fiscal and then to 450,000 tonnes next year.

In the case of structural tubes, sales are expected to go up from 35,000 tonnes in 2005-06 to 70,000 tonnes this year.

"Our expectations are that the market for structural tubes, used for construction, is expected to double every year. Looking at the increasing use of steel in structures, our plans are to raise capacity to over half a million tonnes," said Kamra.

Of the 38.1 million tonnes steel production capacity in the country, Tata Steel accounts for around four million tonnes. It is aggressively looking to raise the production capacity to 30 million tonnes by 2015.