Metal and steel is the backbone of the oil & gas industry. Perhaps 70% of what we build (structures) is made of steel and other metals. Steel materials, being the bulk of structures, could be stainless steel, duplex steel, carbon steel, alloy steel, and forged steel. The list of steel products is expansive and includes plates, tubular (rolled and seamless), joints, bar, beams, columns, bolts & nuts and more. In addition, those products come in various sizes, lengths, and thicknesses.
All of it, also called structural steel, major steel or primary steel, is used to build various structures to support oil & gas platforms offshore and facilities onshore. Those support structures are commonly called “jacket” and it is a steel structure of 4 to 6 legs made of a frame of welded tubular, with relevant joints to form a truss structure, when required. Topsides of the platforms where the processing equipment and accommodation is located, and bridges that link platforms together, is another large application area where structural steel is used.
Structural steel comes in various grades and with various material and chemical properties. Understanding technical details and economics in selecting structural steel is very complex and require specialized expertise in multiple domains. A balance between steel properties such as machinability, weldability, tensile and impact strength, high yield, corrosion properties and price of steel is always required. Achieving this balance is a challenging task, but various simulation software is available to help.
There is a very diverse range of grades of structural steel used in the oil industry with some degree of interchangeability and area of common applications. Organizations and standardization authorities like ASTM, SAE, BSI, API, BSI, CSA, DIN, ISO JIS all set steel standards, grades, and coding. It is important to realize that those standards are not equivalent to each other, but rather exist to be compatible and comparable.
Amongst all steel types, carbon steel is perhaps the biggest type of structural steel used to fabricate: steel frames, stairways and walkways, skids, support structures and many more. Carbon steel is not designed to withstand the highly corrosive environment, however with the right coating and cathodic protection, generally, carbon steel is more economical option than stainless steel.
All structural steel is inspected and tested to comply with certain standards and grades. In many cases, steel producers would produce steel that may comply with a range of grades, so the manufacturing process is more efficient, as opposed to producing in small batches to comply with each and every standard and grade.
Total Cost of Ownership
Total Cost of Ownership
The procurement of structural steel could a very challenging task for an organization. By large and traditionally, structural steel has always been part of a bigger scope delivered under EPC / lump sum projects. As a result, the expertise of buying this commodity has always been with EPC companies, which in turn allowed EPC contractors to acquire a large purchasing power, by leveraging on bigger volumes and, is some cases, aligning with steel producers/distributors.
Because of a diverse range of standards and grades, achieving balanced production economics of steel is challenging. As such, many steel producers would produce steel that is in demand. Distributors tend to follow a similar pattern, as holding slow-moving steel is uneconomical. This fact makes this category volatile when it comes to “meeting the requirements” and may result in buying what is available. In many cases, this approach proved to be effective from cost and delivery standpoint, when steel grades are not of a unique nature. Yet, when the grades of structural steel are higher or certification requirements are more stringent or higher, the issue of achieving balanced production economics makes the procurement process more complex and volatile.
Generally, structural steel falls into a Leverage category of spend, whereby it is high value and high proportion spend, dominant power within buyers’ organization and there are many suppliers available. One of the best procurement strategies of this situation is identify-group-leverage, whereby multilayer and long-term agreements are placed with preferred suppliers, in return for long-term price stability, inventory management, preservation, and flexibility.
If purchasing quantities are not significant, it is perhaps more prudent to get an EPC contractor or a fabrication contractor to take the responsibility and procure structural steel.
Spot buying (as-and-when-required) is another procurement strategy option that may work successfully. Under this scenario - the time is of the essence, as suppliers generally work on the first-come-first-served basis and may not be willing to commit long-time bid validities.
Because of the magnitude of steel grades, it is much more efficient to specify the acceptable range of steel grades according to different standards, at the time of soliciting proposals. The reason being – on many occasions suppliers may offer compatible alternatives and it might take a while to evaluate those alternatives, or may exclude steel grades (and vendors) with a good value-for-money proposition.