The Advantages of Ohio Valley Shale are Growing
The Marcellus and Utica shale formations are among the richest reserves of natural gas and natural gas liquids in the world, creating jobs, opportunity and attracting investments with global impacts.
Wally Kandel – Founding Director, Shale Crescent USA•Published: Tue Mar 19 2019
The Marcellus and Utica shale formations have become some of the most significant sources of natural gas and natural gas liquids in the world. The resulting potential benefits to the Ohio Valley region are profound.
IHS Markit has released a groundbreaking study that for the first time quantifies the production trends and economic benefits likely to emerge from the Marcellus and Utica shale formations. The study, “Estimated Logistics Benefits of the Shale Crescent USA Region Versus the U.S. Gulf Coast for Natural Gas and LPG,” indicates that the two formations will supply nearly half of the nation’s natural gas and nearly a fifth of its natural gas liquids by 2040.
These volumes, coupled with the low-cost of feedstock and close proximity to end user markets are expected to lead to a second petrochemical hub in the tri-state area of Ohio, Pennsylvania and West Virginia.
The IHS Markit study said that the tri-state region “will play a key role in satisfying America’s increasing reliance on natural gas, as well as keeping energy costs moderate. Favorable production economics place the Marcellus and Utica shale plays amongst the most cost competitive in the nation.”
Consider what we already know about the Shale Crescent region:
- The region’s natural gas industry has been the biggest driver of energy growth in the United States for the last four years.
- The last IHS study showed the clear advantages associated with ethane: it yields a 23% cost advantage for producing ethylene/polyethylene in the region verses the US Gulf Coast.
- The current IHS study found additional cost advantages for the production of various natural gas components such as methane, propane and butane in the Midwest versus the Gulf Coast are expected to range from 10 percent to 26 percent. The savings already are impacting petrochemical company expansion plans.
- Ohio is among the nation’s leaders in natural gas power plant construction, with 10 plants either completed or in the permitting or planning process.
- The region has emerged as a national leader in energy, with the shale industry contributing more than $70 billion in new private sector investments from 2011-17, according to a Cleveland State University study.
- Cleveland State also documented that the savings for ethane transportation, together with the savings on shipping polyethylene from the Gulf Coast back to the Midwest, has been projected to be around $100 million per year for prospective local large-scale crackers.
IHS Markit has now completed two studies that have found significant cost savings for petrochemical investment in Shale Crescent USA. It’s driven by some of the lowest-cost feedstock in the developed world, massive reserves unlocked by revolutionary technologies and unrivaled access to end markets.
The expected savings, as well as the region’s access to water for transportation and processing and its close proximity to the East Coast, Midwest and Mid-Atlantic states make the region a prime candidate for what many industry experts expect to be a second U.S. petrochemical hub.
In light of this, it’s worth stepping back to understand the full spectrum of possibilities at hand for this region of the country.
There is considerable benefit for the local economies in the Ohio Valley. The large-scale projects inherent in petrochemical production often provide hundreds of high-paying construction jobs and skilled positions to operate facilities going forward. During the construction of Lordstown Energy Center power plant in Northeast Ohio, for example, 1,026 jobs were created, which generated an estimated $148.3 million in payroll.
Considerable impact is felt by those outside the petrochemical complex as well. Restaurants, real estate and other related industries experience similar benefits to employment and wages. These wages increase the tax base and help support schools, infrastructure and other necessary investment in the region.
The resources being extracted have considerable value locally as well. Products down the value chain from natural gas components like methane stand to uniquely benefit the region. These include agricultural products, such as fertilizer in the form of ammonia and urea, and methanol, the base of many industrial chemicals.
The tri-state region is transforming its energy economy and with it, is developing a second petrochemical hub that will benefit the nation.