The recent U.S. decision to impose a 25% tariff on steel and aluminum imports is set to significantly impact the oilfield services sector, which heavily depends on these materials for equipment and infrastructure.
Companies like ChampionX and Patterson-UTI, essential providers of drilling rigs, pipelines, refineries, compressors, storage tanks, and offshore platforms, are bracing for increased operational costs. Patterson-UTI’s CEO, Andy Hendricks, noted that approximately 14% of their purchases come from countries affected by the tariffs, potentially leading to cost increases in the low single digits.
The tariffs are expected to drive up prices for oil country tubular goods (OCTG)—specialized pipes and tubes designed to withstand high pressures, temperatures, and corrosive environments. In 2024, the U.S. imported nearly 40% of its OCTG, with Canada and Mexico accounting for 16% of these imports by January 2025. Analysts predict that tariffs could increase OCTG costs by 15% year-on-year, with hot-rolled coil steel prices estimated to rise to $890 per short ton in 2025, marking a 15% increase from the previous year’s average.
These cost surges are likely to be passed on to exploration and production companies, particularly smaller-scale producers more exposed to spot market pricing. OCTGs represent about 8.5% of drilling and completion costs for onshore wells in the Lower 48 states; a 25% price increase could add approximately 2.1% to overall well costs, which typically range from $8 million to $9 million.
Larger producers, such as Exxon Mobil, ConocoPhillips, EOG Resources, and Diamondback, with robust balance sheets and diversified supply chains, are better positioned to absorb these additional costs. However, the tariffs come amid declining oil prices—the lowest since Russia’s invasion of Ukraine disrupted supply chains—posing further challenges to the profitability of producers.
Moreover, companies like Venture Global, Energy Transfer, and Williams Companies have indicated in regulatory filings that tariffs could escalate project costs, particularly concerning construction involving foreign-sourced materials like steel and aluminum.
While the tariffs aim to protect domestic steel and aluminum industries, they present significant challenges for the oil and gas sector, potentially leading to increased operational costs and financial strain, especially for smaller companies.
