US Oil Pipeline Companies, Producers Seek Relief From Steel Tariffs
HOUSTON, June 19 (Reuters) - Major U.S. energy companies including Plains All American Pipeline, Hess Corp and Kinder Morgan Inc are among many seeking exemptions from steel-import tariffs as the United States ratchets up trade tensions with exporters including China, Canada and Mexico.
There have been nearly 21,000 requests overall for exclusions submitted to the U.S. Commerce Department since the Trump administration imposed levies this year. Of those, more than 500 petitions involve pipes and related materials.
Initial decisions are expected this month, offering the first clues as to how the administration will balance an agenda favoring oil and gas exports while also supporting the U.S. steel and aluminum industries.
For the energy industry, the potential for relief has taken on added importance after China surprised markets last week by proposing 25 percent levies on about $1 billion a month in U.S. oil imports in retaliation for U.S. tariffs.
The pipeline industry could face higher costs from tariffs as about 77 percent of the steel used in U.S. pipelines is imported, according to a 2017 study for the pipeline industry. Benchmark hot-rolled U.S. steel coil prices are up more than 50 percent from a year ago, according to S&P Global Platts.
Pipelines from the nation's largest oilfield in west Texas to the Gulf Coast are nearly full, depressing crude prices as output is projected to rise by about 850,000 barrels per day this year, and significant projects are not expected to be completed until at least next year.
Plains sought a tariff exclusion for its 500-mile Cactus II oil pipeline, which will connect West Texas oil fields to export docks near Corpus Christi, Texas. This month, it expects to receive its first material from Corinth Pipeworks SA, a Greek manufacturer, according to a Commerce Department filing.
"We think tariffs would be unjust, but we can tolerate" them, Greg Armstrong, chief executive of Plains All American Pipeline, told investors this month, adding that tariffs and import quotas could hurt U.S. production growth.
No U.S. mills can produce pipe with the specifications needed for Plains' line. Only three mills in the world make such pipe, and delivery delays could exacerbate constraints, the company wrote in its petition, affecting the price of oil from the largest U.S. oilfield.
The 585,000-barrel per day line is due to start flowing next year, just as analysts warn a bottleneck of crude could force some producers to shut in production.
Total pipeline, rail and local refining capacity from the Permian Basin oilfield in March was 3.175 million barrels per day (bpd), according to energy intelligence service Genscape, just shy of the oilfield's roughly 3.3 million bpd output in June.
Rival pipeline operator Kinder Morgan also wants an exclusion for its $1.75 billion Gulf Coast Express natural gas pipeline from West Texas to the U.S. Gulf Coast. It ordered 47 percent of specialized pipe needed for the project from Turkish steel maker Borusan Mannesmann.
Only one U.S. producer could meet Kinder Morgan's needs, but it could not meet the volume required within the necessary timeline, Kinder said in a filing.
The United States is committed to acting on exclusion requests within 90 days of a petition being posted for comments, a Commerce Department spokesman said. The United States could offer refunds on tariffs paid since a petition became active.
View Full Article
WHAT DO YOU THINK?
Generated by readers, the comments included herein do not reflect the views and opinions of Rigzone. All comments are subject to editorial review. Off-topic, inappropriate or insulting comments will be removed.
- Top Canadian Court Quashes City's Challenge Of Trans Mountain Pipeline (Aug 23)
- Canada's Govt May Need to Pay More to Expand Trans Mountain (Aug 08)
- Canada's Takeover of Trans Mountain Pipeline to Close in Late 2018 -Proxy (Aug 07)
Company: Hess Corporation more info
- Hammerhead-1 Strikes Offshore Guyana (Aug 30)
- Hess Loss Shrinks As Higher Oil Prices Offset Falling Output (Jul 25)
- Offshore Guyana Block Could Require Five FPSOs (Jul 23)
Company: Plains All American Pipeline more info
- Fire Breaks Out At Plains All American Crude Tank Near Wichita Falls, Texas (Aug 28)
- Plains to Bring Permian Projects Online Early Amid Pipeline Bottlenecks (Aug 08)
- Permian Pipeline Builder to Challenge US Steel Tariff Exemption Rejection (Jul 17)