Paul Wiseman reports on how demand for midstream infrastructure in Texas is fuelling a series of construction projects,plans to develop VLCC infrastructure and the impact looming trade wars are having on the industry
With rebounded oil prices boosting production, especially in the Permian Basin of Texas and New Mexico, midstream companies from tank and pipeline providers to shipping ports are flooded with expansion opportunities. Normally this news would set sector leaders to dancing in the streets.
But with looming trade wars potentially affecting everything from imports of pipeline-grade steel to exports of crude, LNG and refined products, that joy is on hold. The mid-August announcement that Chinese Vice Commerce Minister
Wang Shouwen would meet in Washington with US Treasury Department Undersecretary for International Affairs David Malpass has aroused hope for those in growth mode. This would be the fourth round of formal talks in 2018, the first since June.
If fully implemented, a 20% to 25% tariff would add significant costs to pipeline construction. However, experts believe construction will continue due to mounting production backlogs in Texas and in Alberta, Canada. ‘Certainly, the steel and aluminum tariffs are a big problem for the US oil industry up and down,’ says Kenny Stein, director of policy research for the Institute for Energy Research in Washington.
‘For pipeline manufacturers, for guys putting steel down the hole – it raises costs for everybody at a time when there are already pipeline bottlenecks, rig crews are getting more expensive and that sort of thing.’
And, at least for the Permian, it’s not just about oil pipelines. ‘There’s not enough crude pipeline capacity, but there’s also not enough gas pipeline capacity. And no one wants to build them because gas prices in Texas are completely in the toilet,’ says Stein.