The joint venture brings together Russia’s PAO Severstal and South America’s Tenaris, which together aim to produce about 300,000 tons of welded OCTG annually for the oil and gas markets in Russia and neighboring countries. The companies said the joint venture combines Tenaris’ pipemaking expertise with Severstal’s steelmaking experience.

“By combining our respective strengths and our commitment to industrial excellence, we believe that we can support the Russian and CIS oil and gas industry with a world-class and very competitive alternative for high-quality OCTG products and services,” Tenaris chairman and chief executive Paolo Rocca said in a statement.

Severstal will hold a 51% stake in the joint venture, and Tenaris will own the remaining 49%.

Severstal chairman Alexey Mordashov said the idea behind the joint venture is to create a logistical advantage by putting production close to the major oil and gas companies operating in the region.

“Our strategic goal is to make Severstal the leader in the future steel industry. And the future belongs to those companies that can provide their clients with unique solutions based on excellent understanding of their needs,” he said.

Construction is expected to take two years to complete.