Could Shale Gas Create a Manufacturing Renaissance in Ohio?

Event speakers tout the state's vast resources as an industrial jobs engine as it vies for Shell's planned ethane cracker.

Ohio's surging shale gas industry has led to manufacturing expansion across the state and is poised for further growth pending the outcome of regulatory issues, said energy experts speaking Feb. 21 at the Ohio Energy Management Conference in Columbus.

Manufacturers in the region stand to benefit further from shale gas production when Royal Dutch Shell builds a planned ethane cracker near the Marcellus or Utica shale plays, said David Mustine, general manager for energy at JobsOhio, a business-growth initiative launched by Governor John Kasich.

The state is competing with West Virginia and Pennsylvania for the Shell plant, known as an ethane cracker. Ohio could know where Shell will build the plant in the "next few weeks," Mustine said.

But even if the plant is located elsewhere Ohio's polymer industry, which utilizes ethylene as a feedstock, would benefit from having the ethane cracker nearby, Mustine said.

"A cracker in our region would be a very positive thing for Ohio, Mustine said. "It would be even sweeter if it was in Ohio. But certainly with it in our region we would benefit."

JobsOhio is working with associations in the state on how the polymer industry can take advantage of having an ethane cracker in the region, Mustine said.

One of the companies that has received significant media attention for shale gas-related expansion in Ohio is V&M Star, a subsidiary of French steel tubing manufacturer Vallourec & Mannesmann Tubes SA.

V&M Star broke ground in June 2010 on a fully integrated seamless steel pipe mill in Youngstown, Ohio. The company has invested $650 million in the facility and expects to employ more than 350 workers when completed later this year.

The company decided to expand in Youngstown, an economically depressed city in the heart of the "rust belt," because of its proximity to the Marcellus and Utica shale fields as well as an established steelmaking workforce, said Joel Mastervich, V&M Star's president and chief operating officer.

The company has received approximately 16,000 applications for the 350-plus job openings, Mastervich said.

But V&M Star isn't the only manufacturing success story related to shale gas expansion in Ohio. Conference speakers noted investments in Ohio by more than a dozen energy and industrial manufacturers in recent years related to shale gas development.

U.S. Steel Corp., Timken Co., Gorman-Rupp Co. and Ariel Corp. were among the manufacturers cited as examples of the impact shale gas is having on manufacturing in the state.

Ariel Corp., a maker of natural gas compressors, has increased its workforce from 500 employees in 2001 to 1,350 today, said Douglas Southgate, co-director of Ohio State University's Subsurface Energy Resource Center. Southgate is part of a study team that plans to publish a report next week on the economic impact of shale gas in Ohio.

Still, environmental concerns, cost and development timeframes pose challenges for further shale gas development, said Andrew Thomas, executive in residence at Cleveland State University's Energy Policy Center.

Shale drilling can cost up to $10 million per well and it can take up to six months to drill the well, Thomas said.

But the payback from liquids-rich shale development prevalent in the Utica formation makes Ohio an attractive investment opportunity and the development period provides long-term industrial activity for the region, Thomas said.

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