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Saudi Aramco: Public

2017Metals conversion workshop


Metals conversion agenda

Session Title Presenter

Opening Saudi Aramco (ID&SSD), Nasser Alrushoud

Value Propositions 1 and 2: Open-die and Closed-die

forgingsCameron, Sim Tze Wei

Value Propositions 3 and 4: Investment and Sand

castingsSaudi Aramco (ID&SSD), Nasser Alrushoud


The next slides contain forward-looking statements regarding future events based

on current expectations, estimates, forecasts, and projections. The data is subject

to updating, revision, further verification and amendment without notice. No

reliance may be placed for any purpose on the information or opinions contained

in this presentation or any other document or statement, or on the completeness,

accuracy or fairness of such information or opinions therein. No representation or

warranty, express or implied, is made or given by or on behalf of Saudi Aramco or

its employees, or any other person as to the accuracy or completeness or

fairness of the information or opinions contained in this presentation and no

responsibility or liability is accepted by any of them for such information or

opinions or for any errors, omissions, misstatements, negligent or otherwise, or

for any communication written or otherwise, contained or referred to in this

presentation.

Disclaimer


















1. Kilo Ton per AnnumSource: Saudi Aramco analysis

Saudi Aramco is seeking to localize metals manufacturing, with focus on methods to manufacture energy products

Metals techniques used to manufacture energy products

Investment Casting

Metals Manufacturing

Sand Casting

CASTING

FORGING

Method Technique

Market size

Rolled-ring

Ktpa1 US$ Mn

78.8 254

57.7 178

Closed-Die 48.0 179

Open-Die 47.4 304

6.9 45

Focus of this section


Source: Saudi Aramco analysis

We followed a bottom-up approach for estimating casting & forging demand and market volume in the Kingdom

Market reports (Technavio, Ihs, etc.)

Saudi Aramco

Components Inputs Outputs

KSA Market size

Supplier survey responses

Casting & forging as % of

value

Production method

distribution

Material price

Total casting & forging demand

Demand by production

method

Volume by production

method

Bottom-up market estimation methodology

Valves

Turbines

Wellhead equipment

Gears

Compressors

Blowout preventers

Flanges

…


Establish a forge and

fabrication shop to

provide open-die forging

components used in the

energy sector

1. Current KSA demand of open-die forgings is estimated at

47k tons/annum for energy

products

2. Forecasted 3% annual

growth for both KSA and

GCC

3. Attractive cost base including

one of the lowest logistics, land and utilities costs

amongst EU & NA production hubs

Open-die forging represents an attractive opportunity given the current supply gap and expected demand growth in the Kingdom

The opportunity The business case



The total market size for categories that drive demand for open-die forging is estimated to be US$ 2.7 billion in KSA

Source: Technavio, IHS, Saudi Aramco analysis

PumpsPositive displacement, impulse, velocity, gravity, steam and

valve-less pumps275

Types and sub-types2016 Market size of the category (US$ Million)

Gas compressors

Positive displacement - Reciprocating, RotaryDynamic – Centrifugal and Axial 190

Turbines Pelton, Turgo and Crossflow 1,151

Ball valves Single, three-piece, split, top entry, and welded 204

Electric motors Single Phase and Three Phase AC 441

Wellhead equipment

Casing head, spools 320

Blowout preventers

Annular, Ram 120

Open-die forging - key demand drivers


Open-die forging historic demand in KSA was estimated at ~47 Ktpa or ~US$ 304 million in 2016

Source: Saudi Aramco Data, Saudi Aramco analysis

KSA market size evolution (Ktpa, US$ Million)

2012

46

20152014

45

2013

42 43

+3%

2016

47

Volume

(Ktpa)

Market size

(US$ Million)$xxx

$896.4

$965.3

$1,042

$1,223

270 278 287 295 304

There exist small-sized fabrication shops in the KSA however there are no large-scale and advanced open-die forging players

Open-die forging represents 47 Ktpa or approximately half of the total forging market


The total demand for open-die forging in the Kingdom is estimated at ~47 KTPA, driven by Valves and Wellhead demand


Open-die forging categories Market demand (Ktpa)

Ball Valves 13.0

Wellhead Equipment 11.2

Electric motors 7.4

Turbines 6.4

Pumps 3.8

Blowout Preventers (ram) 2.7

Blowout Preventers (annular) 1.6

Compressors (Gas) 1.3

Total 47.4

Estimated open-die forging demand per category (2016)


The open-die forging GCC market is expected to reach 118 Ktpa by 2030

96

2018

45

50

47

118

53

2019

48

2020

10198

3%

2025

5262

56

44

49

2017

93

GCC open-die forging market expected size evolution (Ktpa)

Saudi Arabia account for 53% of the open-die forging market in GCC

The KSA open-die

forging market is

forecasted to grow at

3% annually until

2030

Source: Saudi Aramco analysis, Technavio, Icon group, Saudi Arabia General Authority of Statistics

KSARest of GCC


Closed-die forging represents an attractive opportunity given the current supply gap and expected demand growth in the Kingdom

Establish a forging and

fabrication shop to provide closed die forging

for components of energy

products

The opportunity

1. Current KSA demand for closed-die forging is estimated

at 48k tons/annum for

energy products



GCC




The business case



The total market size for categories that drive demand for closed-die forging is estimated at US$ ~2.3 billion in KSA


Closed-die forging - key demand drivers

Turbines Pelton, Turgo and Crossflow 1,151

Wellhead equipment

Casing head, spools 320

Gears Spur, helical, bevel, worm, Herringbone and Rack and pinion 94

Gas compressors

Positive displacement - Reciprocating, RotaryDynamic – Centrifugal and Axial

190

Blowout preventers

Ram, annular 120

Types and sub-types2016 Market size of the category (US$ Million)

Valves Ball, check, gate 367

Flanges Carbons steel and stainless steel flanges 104


Closed-die forging historic demand in KSA was estimated at ~48 Ktpa or ~US$ 179 million in 2016



48

2015

47

201620142013

+3%

4544

2012

43

Volume

(Ktpa)

Market size

(US$ Million)$xxx

$896.4

$965.3

$1,042

$1,223

159 164 169 174 179

There exist small-sized fabrication shops in the KSA however there are no large-scale and advanced closed-die forging players

Closed-die forging represents approximately half of the total forging market in the Kingdom


The total demand for closed-die forging is estimated at ~48 Ktpa, mainly driven by Flanges and Valves demand


Estimated closed-die forging demand per category (2016)

Closed-die forging categories Market demand (Ktpa)

Flanges 20.9

Ball valves 6.0

Gate valves 5.4

Turbines 6.4

Wellhead Equipment 3.2

Gears 2.7

Check valves 1.6

Gas compressors 0.8

Blowout Preventers (ram) 0.7

Blowout Preventers (annular) 0.4

Total 48.0


The closed-die forging GCC market is expected to reach 119 Ktpaby 2030

2020

3%

100

2018

97103

2025

119

2019

94

2017

63

56

51

474649

45

545249

GCC closed-die forging market expected size evolution (Ktpa)

Saudi Arabia account for 53% of the closed-die forging market in GCC

The KSA closed die

forging market is

forecasted to grow at

3% annually until

2030

Source: Saudi Aramco analysis, Technavio, Saudi Arabia General Authority of Statistics

KSA

Rest of GCC


There is potential for localization across all the stages of the open-die and closed-die forging value chain

Gaps

• Limited capability of tool design, which is currently taking place outside KSA

• Plans to localize production of steel billets and ingots at high scale

• Efforts to localize forging lubricants such as graphite and coating based

• Limited forging capabilities in the Kingdom, limited to Flanges manufacturing

• Lack of investments in technological advancements such as next-generation forging technologies (NFG)

• Lack of advanced forging finishing operations in the Kingdom including machining and heat treatment

• Limited maintenance, repair, and operations by third-party service providers to serve the forging industry in the Kingdom

Tier-3 Tier-2Tier-1/2

Tier-2/3

Input materials Forging FinishingOperations and maintenance

Design


Open-die and closed-die value chain


There are three sets of input materials used in the forging process: Billets/ ingots, die materials, and lubricants


Metals

• Metals typically used for investment casting include

– Iron

– Steel

– Aluminum

Plans to stablish steel billets and ingots manufacturing facilities

Die materials

• Die materials commonly used include:

• Chromium

• Tungsten

• Steel

Lubricants

• There are different types of lubricants employed in forging:

– Water-based lubricants

– Glass coating

– Graphite oils and greases

Currently made available by vendors

Ingots and Billets to be available in the Kingdom by 2018/ 2019

Ongoing plans to localize lubricants in the Kingdom

Forgings input materials

Input materials


Saudi Aramco will support localization efforts of state-of-the-art forging facilities, including NGF

Source: Saudi Aramco analysis.

Advantages:

• Lower material consumption

• Increased flexibility

• Reduction in environmental impact

• Increased efficiency in forging processes

• Reduction in overall production costs

• Improved materials and/or material properties

KSA based companies can acquire and sustain competitive advantages by incorporating advanced forging technologies

Next generation forging technologies are developed to help companies

reduce their energy dependency, improve their environmental footprint,

and gain a competitive edge in the forging industry

“” European commission

Rapid Prototyping

Automatedforging

Computer simulation

Next Generation Forging (NGF)

NGF

Forging


In addition to performing rough machining, the forging company can also extend value-add machining services to the KSA market


Equipment used in machining operations

Advanced rough machining is conducted in-house by forging companies

Marking Machine

Milling Machine

Lathe MachineMachining modules for

turning & drilling operations

Grinding Machine

Horizontal Surface Grinding Machine

Preparation Equipment Band Saw

Precision Machining CNC Horizontal LatherCNC Machining Centers CNC Turning Center

Finishing


There is need to set-up high scale heat treatment facilities to support local forging operations


Heat treatment objectives:

• Relieve of internal stresses (produced by machining)

• Refinement of grain structure

• Attainment of improved mechanical and physical properties

Heat treatment processes:

Normalizing

Annealing

Quenching

Induction hardening

Case hardening

Solution treatment

Heat treatment is usually integrated as an in-house capability by open-die and closed-die forging companies

Equipment:

Heat treatment techniques

Gas fired furnaces

Electrically heated furnaces

Wash-rinse

Material handling systems

Testing equipment

Quench or cooling

equipment

Finishing


The forging company can either perform testing inhouse or outsource to third-party providers in the Kingdom

Source: Scot Forge, Saudi Aramco analysis.

Forging required testing capabilities

Mechanical testing

methods

• Tensile

• Dynamic tear

• Hardness

• Crack Tip Opening displacement

• Fracture toughness

• Fatigue, crack growth

• Charpy impact

• Nil-Ductility Transition Temperature (NDT)

Metallurgical testing

methods

• Metallography

• Grain size

• Microcleanliness

• Macrostructure

• Corrosion

• Optical emission spectroscopy

• Phase identification and phase count

NDT testing methods

• Ultrasonic Inspection (UT): Contact A-Scan Testing, Phase Array

• Magnetic Particle (MT): Wet Fluorescent, Dry Powder

• Liquid Penetrant (PT): Water Washable Fluorescent, Visible Dye

• Elemental Analysis using Optical Emission and X-ray Fluorescence Spectrometry

Operations & maintenance


Next step is to connect with OEMs across categories. Saudi Aramco is willing to facilitate and support forging localization

Potential consumers of forgings in the Kingdom










1. Kilo Ton per AnnumSource: Saudi Aramco analysis

Saudi Aramco is seeking to localize metals manufacturing, with focus on methods to manufacture energy products

Metals techniques used to manufacture energy products

Investment Casting

Metals Manufacturing

Sand Casting

CASTING

FORGING

Method Technique

Market size

Rolled-ring

Ktpa1 US$ Mn

78.8 254

57.7 178

Closed-Die 48.0 179

Open-Die 47.4 304

6.9 45

Focus of this section


Investment casting represents an attractive opportunity given the large supply gap and multiple possible value chain plays

Establish local

manufacturing of

investment casting plant

to serve demand of

energy products in the Kingdom and the GCC

The opportunity

1. Current KSA demand of investment casting is

estimated at 79 ktpa for

energy products



GCC




The business case



The total market size for products that drive demand for investment casting is estimated to be US$ ~2.4 billion in KSA


Types Market size

Turbines US$ 1,151 millionTurbines

Stainless steel and Nickel-based alloy number 214

US$ 190 millionGas

compressors

Gate valves

Butterfly valves

Globe valves US$ 43 millionValves

US$ 123 million

US$ 73 million

Casing, impellers, stuffing box, discharge head, bowl, suction pipes

Pumps US$ 275 million

Gears US$ 94 millionGears

Electric motors casing US$ 411 millionMotors

Check valves US$ 40 million

Investment casting - key demand drivers


Investment casting historic demand in KSA has been growing at 3% annually, reaching ~79 ktpa in 2016



2012

77

20152014

74

2013

70 72

+3%

2016

79

Volume

(Ktpa)

Market size

(US$ Million)$xxx

$896.4

$965.3

$1,042

$1,223

225 232 239 246 254

There exist small-sized fabrication shops in the KSA however there are no large-scale and advanced investment casting players

Investment casting represents ~79 Ktpa or

58% of the total casting

market


The largest consumers of investment casting in KSA are pumps, electrical motors, gate valves and turbines


Categories Market demand (KTPA)

Pumps 32.6

Electric motors 22.1

Gate valve 7.2

Turbines 6.4

Butterfly valve 2.8

Gears 2.7

Check valve 2.5

Globe valve 1.6

Compressors (Gas) 1.1

Total 78.8

Estimated investment casting demand per category (2016)


Going forward, the investment casting market in KSA and GCC is expected to grow at 3% CAGR, reaching 226 ktpa by 2030

81 84 86 89103

119

73 75 78 80

93

107169

226

2017

154

20192018

159

195

2020

164

2025

3%

2030

GCC investment casting market expected size evolution (Ktpa)

KSA is expected to

grow in line with rest

of GCC maintaining a

constant market share

of ~53%


Rest of GCC KSA


Sand casting represents an attractive opportunity given the current supply gap and expected demand growth

Establish local

manufacturing of sand casting plant to serve

demand of energy

products in the Kingdom

and the GCC

The opportunity

1. KSA demand for sand casting

is estimated at ~58 ktpa in

2016 for energy products



GCC


one of the lowest logistics,

land and utilities costs amongst EU & NA production

hubs

The business case



The total market size for products that drive demand for sand casting is estimated to be US$ ~757 million in KSA


Types Market size

Valves

Ball valves US$ 204 million

Gate valves US$ 123 million

Butterfly valves US$ 73 million

Globe valves US$ 43 million

Check valves US$ 40 million

Bearing bracketsPumps US$ 275 million

Sand casting - key demand drivers


Sand casting historic demand in KSA was growing at a CAGR of 3% annually and reached ~58 Ktpa in 2016


KSA market size evolution (Ktpa, $ MM)

2012

56

20152014

54

2013

51 53

+3%

2016

58

Volume

(Ktpa)

Market size

(US$ Million)$xxx

$896.4

$965.3

$1,042

$1,223

158 163 167 172 178

There exist small-sized fabrication shops in the KSA however there are no large-scale and advanced sand casting players

Sand casting

represents 58 Ktpa or

~50% of the total

casting market in KSA


The main drivers for sand casting demand are gate, butterfly and ball valves


Categories Market demand (Ktpa)

Gate valves 20.1

Butterfly valves 12.4

Ball valves 8.7

Globe vales 7.3

Check valves 6.6

Pumps 2.8

Total 57.7

Estimated sand casting demand per category (2016)


The GCC sand casting market is expected to grow at a CAGR of 3% to reach 166 ktpa by 2030

59 61 63 6575

87

54 55 57 59

68

79

3%

166

20302025

124

2020

120

143

113

2018

116

2017 2019

GCC sand casting market expected size evolution (Ktpa)

Saudi Arabia account for ~50% of the sand casting market in GCC

The KSA sand casting

market is forecasted

to grow at 3%

annually until 2030


Rest of GCC KSA


There is potential for localization across all the steps of the casting value chain

Investment Casting

• Molds are precision engineered to specs and could be designed and printed in-Kingdom

• Sufficient availability of ceramics in KSA

• Limited availability of custom wax blends

• Steel billets and ingots to be manufactured locally by 2018/2019

• Aluminum is available in sufficient volumes

• Future plans to produce copper in the Kingdom

• Absence of large scale casting equipment in KSA

• Limited process automation capabilities for precision casting

• Potential local manufacturing of key equipment e.g. metal melting furnace

• Limited presence of metal testing facilities

• Limited heat treatment facilities (autoclaves etc.) in KSA

• Limited availability of CNC lathes and other precision machining equipment for finishing

• Limited presence of competent technical advisors in the casting field

Sand Casting

• High potential to manufacture molding sands as KSA has a high volume of silica and binders

Tier-1/2/3


Input materials Casting Value-add servicesMold and pattern manufacturing

Casting value chain analysis


Ceramics and binders are available in-Kingdom and thus the investment casting molds can be manufactured locally

WaxCeramics and binders

• Waxes are usually paraffin waxes and are of three kinds

– Filled

– Non filled

– Soluble waxes

• Paraffin waxes are further compounded to make investment casting waxes

• Ceramic core consists of materials consist of alumina, zircon, zirconia and fused silica

• Binders include colloidal silica, colloidal zirconia and colloidal yttria

Wax Ceramic core and binder Molten Metal

Wax Injection and precast

Ceramic shell making

Wax melting furnace

Metal casting Post casting


Investment casting mold manufacturing

Mold and pattern manufacturing


Saudi Arabia is a net exporter of Silica sand and thus there exist an opportunity to manufacture sand molds in-Kingdom

Mold materials Materials Available in-Kingdom

Molding sands

Silica ✓ Saudi Arabia is an exporter of Silica

Sand

Olivine ✓

Chromite

Zircon

Chamotte

Binders

Clay ✓

Oil ✓

Resin (i.e., urea formaldehyde) ✓

Sodium silicate ✓

Additives Iron oxide

Sand casting mold manufacturing


Mold and pattern manufacturing


Steel scrap is available, while other steel forms, aluminum, and copper will be produced locally by 2018/2019

Casting input materials

Steel

• Availability of local steel scrap. The government has imposed a ban on ferrous scrap exports to support industry

• Access to Middle East market, a net exporter of metal scrap

• Plans to make ingots and billets available in the Kingdom in 2018/2019

Aluminum

• Ma’adenAluminum is the largest and most efficiently integrated Aluminum complex in the world

• JV partnership between Ma’adenand Alcoa ensures long-term stability and world class technological support as well as globally accepted standards

• Ma’adenhas become one of the lowest cost supplier of aluminum raw material products in the world

Copper / Brass

• Maaden Barrick Copper Company (MBCC) set-up to mine and process copper ore from Jabal Sayid copper mine

• Estimated average annual production will be over45,000 tonnes of copper concentrate per year

• Maaden Barrick Copper Company is a joint venture between Maaden and Barrick Gold Corporation (one of the largest gold mining companies in the world)

Input materials



Equipment for mold manufacturing and casting process can be localized in the Kingdom


Wax Injection

and precast

Ceramic shell

making

Wax melting

and sand

molding

Moving table Wax work bench

Wax trees

Sanders Slurry tanks Stiffening machine

Furnace Thermocouple probes

Casting

Post casting

Inspect-ion and testing

Metal melting furnace

Grinding station

CNC Heat treating

Universal testing machine

Micrometer

Casting equipment to be potentially localized


Value-add services such as cleaning, inspection, testing, and heat treatment can be either conducted inhouse or outsourced


Investment and sand casting value-add services

• Cleaning involves removal of sand, scale, and excess metal from the casting• Burned-on sand and scale are removed to improved the surface appearance of the casting• Excess metal, in the form of fins, wires, parting line fins, and gates, is through precision cleaning

for both sand and investment casting

Cleaning

Inspection and maintenance

• Inspection of the casting for defects and general quality is performed• Defects include: mold shifts, core shifts, mold cracks, gas cavities, shrinkage cavity•Maintenance includes maintaining the electrical equipment required for scaling investment and sand casting operations

Testing

• Accreditations including: ISO 9001-2008 / TS 29001-2003• Thermal analysis• Sand and wax testing• Metallographic examination• Physical properties analysis

Heat treatment

• Normalizing• Annealing• Induction hardening• Case hardening

• Quenching• Solution treatment

Value-add services


Next step is to connect with OEMs across categories. Saudi Aramco is willing to facilitate and support casting localization

Potential consumers of castings in the Kingdom


Please direct all inquiries to:

We invite you to engage with the iktva program and grow your business in Saudi Arabia

Nasser K Alrushoud

Local Industrial Development

Saudi Aramco

[email protected]

Office number: +966 13 679-5437

Documents

PowerPoint Presentation equipment Casing head, spools 320 Gears Spur, helical, bevel, worm, Herringbone and Rack and pinion 94 Gas compressors Positive displacement - …