Tight pipe supplies bedevil U.S. energy companies

By Anna Driver

HOUSTON (Reuters) - A shortage of steel pipes could disrupt the boom in U.S. natural gas drilling for the energy companies that rely on the tubes to drill and line their wells.

Seamless steel pipes, known as tubular goods in the oil patch, are in short supply after an unexpected resurgence in the North American onshore drilling market.

"The tubular situation is about as tight as we've seen it in the last 20 or 30 years," Mark Papa, the chief executive officer of EOG Resources Inc (EOG.N: Quote, Profile, Research, Stock Buzz) recently told investors.

The jump in natural gas prices earlier this year and the move to tap shale rock formations that were once seen as untenable have triggered a rush to secure tubular supplies, surprising the industry.

"Certainly, at the beginning of the year, North America was considered dead money," said Jeff Spittel, oilfield services analyst with Natixis Bleichroeder. "I imagine that people who didn't recognize the reversal right away may have been caught short."

Demand for oilfield pipe is up sharply as exploration and production companies roll out aggressive plans to increase drilling, especially in areas like the Haynesville shale in northern Louisiana.

For example, Tenaris SA (TENR.MI: Quote, Profile, Research, Stock Buzz) (TS.N: Quote, Profile, Research, Stock Buzz) (TENA.BA: Quote, Profile, Research, Stock Buzz), a global producer of seamless steel pipes based in Luxembourg, said its North American tube sales soared 42 percent in the second quarter to $986.5 million.

But U.S. pipe stocks are very low following a slowdown in drilling in the United States and Canada in 2007.  Continued...