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CERAWeek: Steel tariffs would add to infrastructure challenges: executive

President Donald Trump's proposed tariff on imported steel likely would have a negative impact on the growth of the US natural gas industry, particularly in regard to exports of gas, an executive with the country's top gas producer said Wednesday at the CERAWeek by IHS Markit conference in Houston.

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Related news and analysis -- Trump administration: Section 232 steel, aluminum import investigation

Blue Jenkins, chief commercial officer of EQT Corp., said on the conference sidelines that, if imposed, a 25% tariff on foreign-produced steel would increase the cost to build out needed pipeline infrastructure, which gas producers such as EQT are depending on to move their product to market.

"But the bigger point is: the largest demand market is international through LNG and if you're going to slap tariffs on the international market, which ultimately drives the US gas markets, you should expect repercussions," he said. "I don't think that's good for us as an industry."



Jenkins said he thinks that despite regulatory and environmental challenges that have slowed the progress of some infrastructure projects designed to provide takeaway capacity to the Appalachian Basin, those pipeline projects ultimately will be built.

"Today it is much more challenging and it takes much longer than it used to but they're still being built," he said.

One worrying trend, from the gas producers' point of view, has been the shift in focus of pipeline opponents from the federal regulatory process to that of the state level.

"New York has been effective in slowing down the infrastructure. I suspect other players will take notes from that playbook," he said.

Appalachian gas currently trades at a discount to the Gulf Coast region and likely will trade at 50-60 cents/MMBtu below Henry Hub prices for the balance of this year, Jenkins said.

"That gets better in the near term as pipes come on," he said.

EQT is the largest US gas producer by volume with 2018 production expected to average between 4.5 Bcf/d and 4.6 Bcf/d, roughly 5% of the US gas production.


INFRASTRUCTURE BUILDOUT ALSO A CONCERN IN PERMIAN BASIN


The construction of takeaway pipeline infrastructure is also posing a challenge for oil and gas producers in the Permian Basin, said Brian Freed, senior vice president for midstream and marketing at Apache Corp.

"The oil and gas infrastructure challenges are different," Freed said in his presentation at the conference. "The pinch points are different for each commodity."

Yet new pipes and other infrastructure will need to be built to transport both forms of energy, he said. Apache has seen rapid oil and gas production growth from its Alpine High discovery in the Permian, which it unveiled publicly in September 2016.

In fourth-quarter 2017 the play, which began flowing gas May 3, saw production of 20,000 b/d of oil equivalent, comprising 83% gas, 10% natural gas liquids and 7% oil, according to the company's Q4 earnings report.

"It's an unprecedented hydrocarbon play," Freed said.

A number of projects, such as Kinder Morgan's Gulf Coast Express pipeline, have been proposed to move gasfrom the Permian Basin to the Texas Gulf Coast. That project, a 1.98 Bcf/d pipeline, is being jointly developed by Kinder Morgan, DCP Midstream and Targa Resources.

Freed said that to accommodate the gas production growth expected to occur in the Permian in the next several years would require about seven pipeline projects of similar scope to Gulf Coast Express, or a new pipeline built every year or two.

While some of the proposed projects to service the Permian Basin will be within the state of Texas, and therefore regulated by the Texas Railroad Commission, others are being constructed as interstate pipelines and as such will fall under the jurisdiction of the US Federal Energy Regulatory Commission.

"Intrastate and FERC-regulated pipelines have their own sets of regulatory approvals they have to go through," Freed said, although he said on the sidelines that the approval process for Texas tends to be "a little bit quicker" than that of FERC.

-- Jim Magill, jim.magill@spglobal.com
-- Edited by Jason Lindquist, jason.lindquist@spglobal.com