Alicia Goodrow, a partner in Culhane Meadows’ Houston office based in the city’s Energy Corridor, was recently interviewed by NorthAmOil, a leading news source for the oil industry. The focus of the article is the impact on the oil pipeline sector following President Trump’s new 25% tariffs on steel imports from select countries, including China. Here are some relevant excerpts of the article titled “US steel tariffs could weigh heavily on pipelines” —
The boom in shale oil and gas output is not currently being matched by new domestic refining and pipeline capacity, which is already leading to bottlenecks in distribution. “The demand for pipeline is huge,” a Culhane Meadows senior partner, Alicia Goodrow, told NewsBase Intelligence (NBI). “We are busy in Texas building LNG ports all around the South Texas coast. Those ports have to be fed, so everybody’s putting pipes in everywhere.”
Yet the tariffs risk driving up construction costs to unsustainable levels. Currently, the US energy industry is reliant on cheap, imported steel to meet the demand for infrastructure. “If you want the high-end product, it’s manufactured locally. If you want the mass-produced product, it’s manufactured in China,” said Goodrow.
It is early days in terms of understanding what the full impact of the steel tariffs will be, and whether countries temporarily granted exemptions by Trump will be affected in the future. Pipelines under construction are not threatened by the tariffs, as most of their steel has already been procured. After 2020, though, further infrastructure projects could be left scrambling. However, Goodrow is confident that the tariffs will result in more domestic steel being used by the US oil and gas industry. “There’s this monster demand for pipes and it must be fed,” she said. “It’s slow, it’s going to take time. The government is having to change laws and they don’t know how to expropriate property. Eventually, you’ll have a legal system that’s sophisticated enough to facilitate these kinds of infrastructure projects.”
This view was echoed by the International Energy Agency’s (IEA) executive director, Fatih Birol, who acknowledged in an interview with CNBC that costs could well cause some issues. However, “production growth is so strong and the related financial benefits are so lucrative [US oil] will find a way to go to the export markets”, he added. But the tariffs make the path to the export markets a potentially more difficult one.
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