Shale Insight conference puts focus on downstream opportunities in region

September 27, 2017
Perc Pineda, chief economist for the Plastics Industry Association, told attendees at Wednesday’s session of Shale Insight the abundant natural gas produced in the Appalachian Basin is a major benefit to the plastics industry. - Michael Bradwell/Observer-Reporter Order a Print

PITTSBURGH – For the past several years, the focus of the annual Shale Insight conference has been the increasing production output of natural gas from the Marcellus and Utica shale stratas.

On Wednesday, the conference opened at the David L. Lawrence Convention Center before several hundred industry attendees with a long-term view of the downstream potential of all that continually increasing output, particularly as it applies to the tri-state region.

The conference is sponsored by the Marcellus Shale Coalition, Ohio Oil and Gas Association and West Virginia Oil & Natural Gas Association.

Several speakers said there are “huge” opportunities to add petrochemicals and plastics manufacturing in the area – if a solid expansion strategy is followed.

That strategy was already mapped out by two industry executives, Stacey Olson, president of Chevron Appalachia, and Morgan O’Brien, chief executive officer of Peoples Gas.

Olson, who noted gas produced in Pennsylvania is currently sold at a significant discount to the national price because of a lack of pipeline infrastructure, was the impetus behind the “Forge the Future” study she and O’Brien worked on. The plan is a strategy designed to create more demand for the natural gas being produced in Appalachia.

“The petrochemical and plastics industries are making billions of dollars of investment decisions and where to deploy them,” Olson said.

The question to Olson going forward is, “Do we want to leave that opportunity to chance … or do we want to take control?”

According to Olson, the strategy seeks three main areas of development to create demand: increase gas-fired power generation and heating; develop energy-based clusters that could benefit petrochemical, advanced manufacturing and large data centers; and expedite key pipeline projects for moving the natural gas products.

Olson said the study’s projections show that if the strategy is followed, there could be a $60 billion increase in state gross domestic product above the current trajectory; an increase of more than 100,000 family-sustaining jobs; conversion of half a million homes from fuel oil to low-cost gas for heating; three to five new ethane cracker plants in addition to the recently announced Shell facility; and roughly $3 billion annually in new state tax revenues.

O’Brien, who before taking the helm of Peoples was CEO of Duquesne Light, said he became interested in the project when he realized “there’s nobody out there connecting the dots” between the growing abundance of natural gas in the region and the opportunities for using more of it here.

He added Shell’s decision to build a $6 billion ethane cracker plant in Beaver County and Allegheny Technologies Inc.’s opening of a $1.3 billion advanced manufacturing plant for titanium production are early examples of how natural gas is playing a role in the region’s economy.

While it was not mentioned by the panelists Wednesday, plans are being readied for a study of the feasibility of a large ethane storage hub in the tri-state region that would be designed to attract petrochemical and plastics manufacturers.

The other connection O’Brien noted is that natural gas and its expanded use in industry should be seen as a way to grow Pennsylvania’s economy.

“If you really want to grow the state’s revenue, you’ve got to raise the economy,” he said.

The other key to creating that kind of growth in the area is a prepared workforce.

During brief remarks Wednesday, U.S. Labor Secretary Alexander Acosta said President Donald Trump “is committed to building our nation with American products made by American workers.”

He said while 1.2 million jobs were created since the beginning of the year and the unemployment rate declined during that time to 4.5 percent, there are still 6.2 million jobs open. He added the administration wants to close the gap between the job openings and qualified workers.

“The Department of Labor wants to bring together labor, management and nonprofits to design high-quality apprenticeships” that would fit the various jobs in the marketplace, Acosta said.

The search for qualified workers is critical if petrochemical and plastics manufacturers are attracted to the region because of cheap raw materials.

During a panel moderated by Dave Spigelmyer, president of the Marcellus Shale Coaliation, Perc Pineda, chief economist for the Plastics Industry Association, said low energy prices created by the shale revolution are a key factor for growth in the plastics industry, which continues to create innovative products.

“Are we benefiting from low energy prices? The answer is a resounding yes,” Pineda said.

Michael Bradwell has been business editor for the Observer-Reporter since 1995, and was named editor of The Energy Report in 2012. He joined the newspaper in 1990 as a general assignment reporter in the Greene County bureau and has also worked as a copy editor. A 1974 graduate of Pennsylvania State University with a degree in English, he began his career at the Bedford (Pa.) Gazette. Prior to joining the O-R, he served as public relations director for Old Bedford Village, account executive at two Pittsburgh public relations agencies and copywriter for the country’s largest wholesaler of mutual funds.

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