[INTERVIEW] Steel pipes maker Vallourec sees potential in shale

Philippe Crouzet, chairman of the management board of Vallourec, the French maker of premium steel pipes, speaks in an interview held in Seoul, July 6. / Korea Times photo by Choi Won-suk

By Kim Ji-soo

President Moon Jae-in's pledge to gradually shift away from nuclear power plants in the country's energy mix may have prompted an immediate question among Korean consumers: will my electricity bill go up?

Philippe Crouzet, chairman of the management board of the French steel pipe manufacturer Vallourec, stressed the potential in shale gas to produce energy, electricity.

"Shale gas has enormous potential. The reserves are enormous," Vallourec said in an interview held in Seoul, where he attended a meeting at the French-Korean Chamber of Commerce and Industry. With an office in Seoul, Crouzet regularly visits Korea annually.

While the abundance of shale gas does not necessarily make it profitable to drill more in the United States, he said the demand from Asia makes it a different story.

His remarks come as President Moon said during his summit with U.S. President Donald Trump to import more shale gas from the United States for the next two decades, as a way to diversifty energy mix and also to re-balance bilateral South Korea-US trade ties.

"The demand is going to be very strong, especially in Asia, so I think there will be developments in this area, such as in the transportation of liquefied shale gas from the U.S. to Asia," he said.

Vallourec, established in 1957, is a French firm that makes premium steel tubes and pipes for oil and gas industry, as well as for power plants. Steel was among the array of industries affected by the decline in oil prices in 2014.

Thus, with about 20,000 employees in 20 countries, the firm had to streamline and realign its business structure in recent years to be more efficient. It had to reduce its capacity in Europe down to 25 percent and establish the company's presence in the more competitive markets of Brazil and China.

But it is finding the uptick in the U.S. shale boom a positive impetus for the company.

Vallourec is also watching movements in the world energy market, specifically the movement from coal to gas to produce electricity, which is strong in North America, and seeing whether other regions will follow.

Shale gas, which is found in shale formations, was explored in earnest in the United States in 2008, when the price of a barrel of crude oil stood at around $100. Shale gas also suffered in 2014, hurting the performances of related companies. But innovation in shale drilling technology, coupled with anticipation for further exports to Asia, has led to another uptick in shale gas production. Crouzet said shale gas is competitive already.

As for the global oil prices, Vallourec mentioned two positive factors are creating a sunnier forecast for its business.

"The price of a barrel of crude oil has moved up; it has now stabilized at around $50 per barrel," he said.The futures indicate that it will move within the $50 to $55 dollar.

"The second piece of good news is that the North American market, specifically the oil market, has definitely recovered from its lowest level to a really good level of activity."

Crouzet said while the crisis from declining oil prices continues and development of new oil fields outside the United States have stalled, the company may see an earnest rebound in 2018.

Vallourec is preparing for the advent of renewable or alternative energy sources, their applications and their impacts, including in the electric car industry and the oil and gas sector in general. But Crouzet said the shift will take time, accompanied by innovation and investment in renewables.

"When gas replaces coal to produce electricity, and when electricity is produced for cars, less oil is used. But you see, it's indirect competition. It's not substitution of one for another. Now, those changes will take a lot of time," he said.

"I am convinced we need to go to a lower carbon energy mix, which will require, certainly, investment in renewables. But renewables are not the only solution; they're not the silver bullet. We need to combine different sources of energy."

He also said the same applies to Korea's plan to eliminate nuclear power plants.

"As far as Korea is concerned, even if there is a big change in the policy regarding both coal and nuclear energy, it will take a lot of time, decades, and in that time, there will be a need to retrofit a number of operations before phasing them out later.

And the retrofit is always an opportunity to improve the performance, to make a coal power plant cleaner, or a nuclear power plant safer."

Crouzet said all countries are rethinking their energy policies, but that will take a lot of time and there is also the challenge of having to tackle a lack of energy, or a lack of electricity.

He said Vallourec will work with safer solutions for retrofitting, but also provide new ideas and solutions to ease the transition from one energy mix to the other.