US steel tariffs threaten NGL production – API

HOUSTON (ICIS)–The American Petroleum Institute (API) said on Thursday that US plans to impose steel tariffs on imports from Canada, Mexico and the EU could threaten production of natural gas liquids (NGLs) as well as oil and natural gas.

Earlier in the day, US President Donald Trump signed two proclamations imposing a 25% steel tariff and a 10% aluminium tariff, effective on Friday.

Trump first signed tariff proclamations in March, initially excluding Canada and Mexico, two of the largest sources of imported steel to the US.

“Increased prices in specialty steel could threaten the continued domestic production of oil and natural gas and natural gas liquids – which are at their highest levels of production since 1949 – and could raise energy costs for US businesses and consumers, while threatening the nation’s ability to achieve President Trump’s goal of energy dominance,” according to a statement by Jack Gerard, president of API.

The US petrochemical industry relies overwhelmingly on ethane and other NGLs as feedstock for crackers and for propane dehydrogenation (PDH) plants.

Any threat to NGL supplies could lower profit margins and discourage companies from expanding capacity.

Steel tariffs could threaten hydrocarbon production by making it more expensive for midstream companies to build pipelines to ship oil, natural gas and NGLs from production centres to distribution hubs and customers.

Already, crude oil produced in the prolific Permian basin in western Texas is being stranded there because companies lack the pipelines, trucks and rail terminals to ship it out of the region.

The tariffs could delay new pipeline projects that are needed to ship oil out of the Permian and allow companies to increase production.

Oil wells also produce associated gas, which is rich in NGLs.

Hence, anything that makes it more difficult to build crude pipelines could also slow down NGL production.

The API wants the US government to grant the oil and gas industry exclusions from the steel tariffs and quotas, he said. The API also wants the government to provide transparency and flexibility in the exclusion process to lessen the effects that the tariffs could have on the energy industry.

Gerard pointed out other problems his group had with the tariffs.

“The implementation of new tariffs will disrupt the US oil and natural gas industry’s complex supply chain, compromising ongoing and future US energy projects, which could weaken our national security. Additionally, Canada, Mexico and the European Union are imperative members of our defense industrial base (DIB) and are top military allies – far from a threat to America’s security,” he said.

“We are deeply discouraged by the administration’s actions to impose tariffs on our three closest trading partners – Canada, Mexico, and the EU – and view this as a step in the wrong direction,” Gerard said.

(adds paragraphs 1, 4-15)

Additional reporting by David Haydon