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Tellurian warns that steel tariff may 'significantly' raise LNG project costs

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Tellurian warns that steel tariff may 'significantly' raise LNG project costs

A 25% tariff on imported steel may "significantly" increase construction costs for the roughly $15 billion Driftwood LNG project proposed for southwestern Louisiana, Tellurian Inc. cautioned in a regulatory filing.

The LNG export hopeful, co-founded by U.S. gas export mogul Charif Souki, disclosed the tariff-related risks in results filed with the SEC. President Donald Trump on March 8 signed orders enacting tariffs of 25% on global steel imports and 10% on aluminum. The move was meant to give domestic metals producers a boost but left many in the energy industry concerned about adverse effects on their businesses.

"New or increased tariffs on materials needed in the construction process have been proposed or may be proposed in the future and such new or increased tariffs could materially increase construction costs," Tellurian said in the March 15 filing. "In particular, recently announced tariffs on imported steel may significantly increase our construction costs."

Tellurian's words of caution come a week after Souki told reporters at an industry conference in Houston that while he expects a steel tariff to increase costs for the Driftwood LNG project by 3% to 5%, the measure is "not the end of the world."

"Philosophically, I'm opposed to tariffs and any kind of barriers to trade. I'm a globalist. If that term scares people, too bad," Souki said March 7 at a press briefing at IHS Markit's CERAWeek. "But having said this, this is my personal view. From a standpoint of business, it won't change things much."

The LNG industry has railed against the tariff, which developers say will make already pricey liquefaction and export terminals even more expensive. The CEO and billionaire backer of the Freeport LNG export project under construction in Texas said in an interview that his $13 billion terminal would have cost "a couple hundred million dollars more" had it been subject to such a tariff.

Washington, D.C.,-based trade group LNG Allies sent a letter to U.S. Secretary of Commerce Wilbur Ross on March 14 urging the agency to issue an exemption for all steel products used to build LNG export facilities.

"We believe that the U.S. LNG export industry is such an enormous 'engine' of jobs and economic growth to merit a full, complete, and immediate exemption from the proclamation," wrote LNG Allies President and CEO Fred Hutchison. "We urge you to act as soon as possible to issue a full and complete exemption from the 25 percent tariff for all imported steel products used in U.S. LNG export projects."