US and Chinese based oil & gas steel fabricators have been some of the first companies within the industry to be impacted by the countries playing high-stakes poker through targeted tariffs, Rystad Energy research shows.
On 3 April, the US published a list of approximately 1300 Chinese exports that could see tariffs in the near future. Not to be outdone, the Chinese government promised and delivered additional retaliation. These potential Chinese tariffs include plastics, petrochemicals, petroleum products and specialty chemicals.
“For an oil and gas industry looking to rebound in a higher oil price environment, these tariffs necessitate monitoring. More specifically, oilfield service companies must now take pause,” says Matthew Fitzsimmons, VP Oilfield Service Research at Rystad Energy.
American companies Clariant, Ecolab, Hexion and NOV each have had significant revenues from China in the past few years. NOV brought in revenues upwards of US$561 million during 2017 from their fiberglass and composite tubular businesses in China.
“The giant service company NOV was anticipated to have over US$650 million in annual revenues from China for the remainder of the Trump presidency. A trade war between the two nations could certainly impact their ability to grow in this market,” comments Mr. Fitzsimmons.
Hexion, a chemistry company offering oilfield drilling chemicals, had US$309 million in revenue from China during 2017. Rystad Energy estimates Hexion’s Chinese business could grow to US$350 million in 2019, if it were not impacted by trade tariffs. Continued Chinese and American trade tensions could have an adverse effect on these companies.
While less volume is at stake, the trade tensions also give reason for concern to Chinese service companies. Hilong and Drill Pipe Master are two pipe fabricators that were impacted by initial US tariffs. However, these companies have strong domestic customers and diverse international clients that will soften adverse effects from trade tensions.