Tariffs may hit shale, LNG projects
Measures would impact economics of plant: exec
Energy executives said at a gathering in Houston that the Trump administration’s proposed steel and aluminum tariffs could bump up the cost of big-ticket projects needed for rapidly rising US shale oil and gas output by three to 10 percent.
Higher construction costs could slow growth in production and exports of crude and natural gas from shale that has made the US the world’s largest gas producer and second-largest oil producer.
President Donald Trump’s proposal is emerging as a potential spoiler for new US pipelines, drilling rigs, offshore platforms and refineries to handle coming oil and gas production. Companies including Exxon Mobil Corp, Kinder Morgan Inc and others have outlined tens of billions of dollars of new steel-intensive petrochemical and pipeline expansions in the US.
The administration has not yet formally unveiled its plan. It is unclear whether exemptions would be available for certain sectors, or for steel from places such as Canada, the biggest foreign provider of the metal to the US. US trading partners have said they could counter tariffs with their own levies on US exports.
If the proposed tariffs were in place when natural gas company Freeport LNG was building its first three liquefied natural gas (LNG) production lines, they would have raised the multi-billion dollar construction cost by about $200 million, or between 3.5 percent and 5 percent, Chief Executive Michael Smith said in an interview.
Freeport LNG is in the process of building a fourth production line at the LNG plant in Texas. Steel tariffs would affect the economics of the plant but not deter the company from building it, Smith said at the meeting.
If the tariffs lead to a trade war with China, then Freeport LNG could suffer because China is among the long-term buyers for the gas, he said. US export capacity was less than 2 million tons per annum (Mtpa) in 2015, and is expected to top 77 Mtpa by 2022, which would make it the world’s No.2 exporter.