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President Donald Trump’s administration has given the oil and gas sector its first waivers from a 25pc tariff on steel imports, after agreeing with Shell and Chevron that the specialty steel they were importing is not manufactured in the US.
The US Commerce Department today approved tariff exclusions for 2,760t of steel casing and production tubing that Shell said it will use when drilling wells in the US Gulf of Mexico. It also provided a tariff waiver to Chevron for 80t of corrosion-resistant stainless steel tubing. The exemptions will only last a year and are exclusive to the two companies.
The waivers mark a victory for the oil and gas industry, which is concerned the tariffs will raise costs. The Commerce Department has been working through a backlog of more than 20,000 steel tariff exclusion requests. The agency has processed a total of 280 requests since it began issuing waiver decisions on 21 June.
Commerce today separately rejected Shell’s requests for waivers on another 1,630t of steel products and rejected Chevron’s requests for waivers on 309t of steel tubing. The agency said the applications were incomplete but could be resubmitted. Shell and Chevron did not immediately respond for comment.
None of the tariff waivers processed today were subject to objections. That sets them apart from other more complicated oil and gas sector applications that have attracted protests from US steel companies that say they already make, or could start making, the products the companies are importing.
Kinder Morgan, for example, has requested a tariff waiver on 151,000t of steel for its $1.8bn Gulf Coast Express natural gas pipeline. That led to objections from US pipeline manufacturers Berg Steel Pipe and Stupp, which submitted competing bids on the project. Plains All American Pipeline’s request for a waiver on 155,500t of steel for a Permian basin oil pipeline has drawn objections from JSW Steel, Berg and Dura-Bond Industries. (continued on page 2)
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Oil and gas companies are “cautiously optimistic†undisputed waiver requests will be approved but are “highly uncertain†what will happen with requests that received objections, an oil industry source said. The source said there should be a more rigorous process to verify that US steel companies making objections can quickly start to manufacture the products at issue.
US commerce secretary Wilbur Ross last month said there was a high probability his agency will approve “relatively few†waiver requests because many had no substance and others had “objections that are well grounded posted against them.†Commerce has not said how it intends to evaluate competing claims about whether a steel product is available in the US.
The steel tariffs are already starting to bite for the oil industry. BP chief executive Bob Dudley has said the tariffs could increase its costs by $100mn. That amount could be reduced depending on how the administration responds to its request for waivers on nearly 14,000t of steel imports. Shell, meanwhile, is waiting waiver decisions on another 28,700t of steel that would mostly be used for its proposed 107,000 b/d Falcon ethane pipeline in the Appalachian region.
Industry officials say the tariffs are still preferable to the administration’s efforts to establish import quotas for specific countries.
“What I am most concerned about is a quota that would come in and prevent me from buying the pipe,†Independent Petroleum Association of America vice president Lee Fuller said.
Shell and Chevron, in the tariff waivers approved today, said no US companies produce the type of corrosion-resistant steel they need that could survive extreme conditions of production wells. They also each made national security arguments in support of the requests.
“It does not serve the national security to delay or increase the cost of fuel extraction in the absence of domestic alternatives,†Shell said.
The US last week denied a request for a tariff exclusion for 135,000 t/y of steel tubing and casing that Borusan Mannesmann Pipe US said it would import from Turkey. Commerce said the imported products were manufactured in high enough volumes in the US.
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Valaris Limited announced new contracts awarded subsequent to issuing the Company’s most recent fleet status report on February 21, 2023. Three-year contract with Petrobras for drillship VALARIS DS-8. The rig will be reactivated for this contract. The total contract value is approximately $500 million, including a $30 million mobilization fee. 100-day contract with a TotalEnergies affiliate for drillship VALARIS DS-12. The contract is expected to commence in second quarter 2023. 70-day contract with Beach Energy offshore New Zealand for heavy duty modern jackup VALARIS 107. The contract is expected to commence in third quarter 2023. The total contract value is approximately $26 million. President and Chief Executive Officer Anton Dibowitz said, “We are particularly pleased to have secured the award for preservation stacked drillship VALARIS DS-8, for a contract that is expected to generate a meaningful return over the firm contract term, and we remain focused on exercising our operational leverage in a disciplined manner. This most recent award represents the sixth contract awarded to one of our high-quality stacked floaters since mid-2021, and speaks volumes about our demonstrated track record of project execution when reactivating rigs.” Dibowitz added, “Following the reactivation of VALARIS DS-17 and DS-8, we will have ten floaters working across the golden triangle, including four drillships in Brazil, a market where we expect to see continued growth over the next several years.” Updated Guidance As a result of the contract awarded to VALARIS DS-8, which will require the rig to be reactivated from preservation stack, we are updating our first quarter 2023 and full-year 2023 guidance provided on our fourth quarter 2022 conference call on February 21, 2023. First Quarter 2023 Contract drilling expense is expected to increase by approximately $5 million to $385 million to $395 million. Adjusted EBITDA is expected to decrease by approximately $5 million to negative $5 million to breakeven. Adjusted EBITDAR, which adds back one-time reactivation expense, is expected to be $25 million to $30 million, unchanged from the guidance provided on our fourth quarter 2022 conference call. Full-Year 2023 Revenues are anticipated to be $1.8 billion to $1.9 billion, unchanged from the guidance provided on our fourth quarter 2022 conference call. Contract drilling expense is expected to increase by approximately $60 million to $1.49 billion to $1.59 billion. Adjusted EBITDA is expected to decrease by approximately $60 million to $180 million to $220 million. Adjusted EBITDAR, which adds back one-time reactivation expense, is expected to be $280 million to $320 million, unchanged from the guidance provided on our fourth quarter 2022 conference call. Capital expenditures are expected to increase by $60 million to $320 million to $360 million. Source: Valaris Join our mailing list here We are #1 on Google and Bing for the "Largest Mobile Energy Network" Come join our community! Download the Rig Lynx app here
Seadrill Limited announced that the West Neptune has executed approximately six months of term extensions with LLOG Exploration Offshore, L.L.C in the US Gulf of Mexico. The extensions will commence in direct continuation of the existing term, and will keep the rig busy until Q3 2024, furthering Seadrill and LLOG’s long-term association. Total contract value for the extension is approximately $79 million. Source: Seadrill Join our mailing list here We are #1 on Google and Bing for the "Largest Mobile Energy Network" Come join our community! Download the Rig Lynx app here
Semisub rig owner Dolphin Drilling has inked a new contract with Peak Petroleum in Nigeria for its 1974-built Blackford Dolphin. The firm contract, which follows the letter of award in January, gives the Euronext Growth-listed owner of three rigs the potential to extend the unit’s backlog by a minimum of 120 days and up to 485 days. The deal adds to and will be a direct continuation of the previously announced 12-month contract with General Hydrocarbon Limited (GHL). Øystein Stray Spetalen-backed company said the effective dayrate associated with the minimum firm period of the contract is $325,000, including the mobilisation fee. “The final award of the contract for Blackford Dolphin shows the opportunities in Nigeria at a strong dayrate, in addition to building on the backlog for the rig. It also underlines the attractiveness of our assets, and we look forward to returning to revenue-generating operations in 2023,” noted Bjørnar Iversen, CEO of Dolphin Drilling. Source: Dolphin Join our mailing list here We are #1 on Google and Bing for the "Largest Mobile Energy Network" Come join our community! Download the Rig Lynx app here
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