North American natural gas producers and LNG importers are evaluating their exposure to impending tariffs on Canadian gas flowing into the US, including how they could benefit from uncertainty around the policy.
Marketers responsible for managing gas supplies across the US-Canada border and at least one North American LNG importer are holding internal meetings to discuss risks and opportunities related to the potential tariffs, according to sources who asked to remain anonymous because they are not allowed to speak publicly. President Donald Trump on 3 February delayed 10pc tariffs on energy from Canada and Mexico by a month, a day before they were set to be imposed.
One of the largest US gas producers is reviewing its supply contracts with Canadian customers to evaluate its exposure to possible retaliatory tariffs by Canada, a person with knowledge of the matter told Argus. The company is particularly concerned with its ability to achieve price certainty given a lack of clarity around which party would pay the tariff and how such a transaction might be audited by regulators, the person said.
Some large US gas producers are also looking to exploit the so-called "uncertainty premium" by strategically timing when they hedge their output — ideally, when rhetoric and anxiety over tariffs mounts, so they can lock in higher prices, sources in the banking sector said.
Internal meetings to discuss potential tariffs are also being held at US utility Constellation Energy, owner of the Everett LNG import terminal near Boston, Massachusetts, sources said. Tariffs could make Everett LNG more competitive by modestly raising New England pipeline gas prices, thereby making LNG imports more economical when the price for local pipeline capacity is high. Tariffs could also hurt demand for gas from the Saint John LNG import terminal in New Brunswick, Canada, owned by Spanish energy conglomerate Repsol, since most of Saint John's imported gas supplies are shipped via pipeline across the US border into New England.
Constellation and Repsol did not respond to requests for comment.
New England relies on gas imported from abroad by Everett LNG and Saint John LNG during particularly cold winter days because of insufficient pipeline capacity connecting the region to prolific gas fields in Pennsylvania and the surrounding states.
Goldman Sachs estimates Trump's 10pc tariffs on Canadian energy products would reduce Canadian gas exports to the US by about 160mn cf/d (5mn m³/d), while investment bank RBC Capital Markets said the tariffs could cause "mildly higher US gas prices".
