U.S. steel tariff could affect Shell Gulf of Mexico project decision - executive

FILE PHOTO - Wael Sawan, Executive Vice President for Shell's deepwater division, poses for a picture before an interview for Reuters during an oil conference in Rio de Janeiro, Brazil October 24, 2017. REUTERS/Bruno Kelly

HOUSTON (Reuters) - A potential tariff on U.S. steel imports could affect Royal Dutch Shell's RDSa.L plans to go ahead with a major oil field development in the Gulf of Mexico, a company executive said on Wednesday.

Wael Sawan, who heads Shell’s deepwater operations, said President Donald Trump’s intention to slap up to 25 percent tariffs on imported steel and aluminium could materially impact the value of the Vito development off the Louisiana coast, one of a handful of projects Shell is planning to greenlight this year.

U.S. Energy Secretary Rick Perry said on Wednesday he was “not sure” if Trump had made up his mind about levying the steel tariffs.

Shell has in recent years set a strict ceiling on costs of projects, which all have to generate profit at oil prices of $40 a barrel.

The cost of oil and gas projects, which require huge amounts of raw material including steel and cement, could rise by 25 to 50 percent in some cases if a tariff is imposed, Sawan told Reuters in an interview at the CERAWeek by IHS Markit conference in Houston.

“We are trying to grapple with the implications of the tax changes, which are positive, but also the implications of the steel tariffs or what might come out,” he said.

“I’m hopeful within the next few weeks as we understand more, we will have a better understanding of the economics that impact the decision and timing.”

Shell is expected to make a number of final investment decisions on projects as the sector emerges from a three-year downturn that saw a sharp drop in investments.

Reporting by Ron Bousso; Editing by David Gregorio