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Representatives of the oil and gas upstream industry on Thursday praised a move by the Trump administration that would allow companies to seek exemption from quotas on imports of steel and aluminum products from three countries under certain circumstances.

President Donald Trump has signed a proclamation that would allow the Department of Commerce to provide targeted relief from quotas on steel and aluminum imports imposed under Section 232 of the Trade Expansion Act of 1962, the US Commerce Department said late Wednesday.

Currently South Korea, Argentina and Brazil are subject to a quota for exports of steel to the US. Argentina is also subject to a quota for US imports of aluminum. Companies could seek exemption from quotas in instances when a steel or aluminum product is not available from a domestic supplier in sufficient quantity or quality.

In a limited number of cases, if steel articles that are being used in a facility construction project in the US were contracted for purchase prior to the decision to impose quotas, but cannot presently enter because the US quota has already been reached, an exclusion to the quota may be granted, Commerce said.

The new policy could provide some relief for exploration and production companies because the industry segment is a big consumer of the type of steel products supplied by the three countries. These are products such as tubular pipes that are used for well casing.

However, it is still too early to gauge the overall impact of the administration's trade policies on the E&P industry, Ed Longanecker, president of the Texas Independent Producers and Royalty Owners Association, said in an email Thursday.

"The economic impact of the Trump administration's steel and aluminum tariffs continue to unfold," he said.

Under the administration's direction, a 25% tariff on steel imports and a 10% tariff on aluminum imports went into effect for most countries on March 23. However, following negotiations, the administration imposed quotas on steel imports from Argentina, Brazil and South Korea and for aluminum imports from Argentina in lieu of the tariffs.

Following the imposition of the tariffs in March, prices for oil country tubular goods -- seamless rolled-steel products consisting of drill pipe, casing and tubing -- soared by nearly 30% in some cases, while line pipe expenditures jumped by 10% to 20%, Longanecker said.

INCREASED COSTS

He said tariffs ultimately result in a 25% to 30% increase in the cost of such products, with quotas increasing cost by as much as 43% due to limited supply.

"The cost of this material can range from 7% to 20% of a well," he said.

Longanecker said a number of TIPRO members, including both large and small E&P companies, have expressed concern over the impact of the tariffs.

"Ultimately, the tariffs will result in a slowdown in exploration and production activity and infrastructure projects, job loss and decreased tax revenue," he said. "This is one of the top priorities facing the Texas oil and natural gas industry today."

Meanwhile, the presidential proclamation is expected also to have significant impacts on the natural gas pipeline industry, since South Korea is a very big player in the pipeline steel market, although Argentina and Brazil are more modest exporters.

Last year steel product imports from South Korea included about 1.05 million metric tons of products classified as "oil country goods," 666,414 mt of line pipe and 151,159 mt of standard pipe.

Over the same period, steel product imports from Argentina included 192,654 mt of oil country goods, 6,487 mt of line pipe and 1,223 mt of standard pipe; and the US imported from Brazil 154,515 mt of oil country goods, 46,324 mt of line pipe and 1,574 mt of standard pipe, according to Commerce Department trade data.

Cathy Landry, a spokeswoman for the Interstate Natural Gas Association of America, cited a study of steel imports that consultancy group ICF performed for INGAA last year that found that "for certain larger diameter, heavy-walled, specialty pipe -- the type of pipe often used to build interstate natural gas pipelines -- there is limited domestic capacity today."

-- JIm Magill, newsdesk@spglobal.com

-- Justine Coyne, newsdesk@spglobal.com

-- Edited by Gail Roberts, newsdesk@spglobal.com