By: Frank Esposito
February 24, 2014
More natural gas — a key plastic resin precursor — is expected to flow from Ohio.
Natural gas from the Utica and other numerous shale-based fields throughout North America have prompted major resin makers to announce expansion projects for the first time in more than a decade. Most of these projects will be on the U.S. Gulf Coast, but some have been proposed for Pennsylvania, West Virginia or Ohio.
Shale industry experts reviewed the market's prospects at Crain's Shale Summit 2014, an event hosted by Crain's Cleveland Business, Feb. 20 in Mayfield Heights, Ohio. CCB is a sister publication of Plastics News.
"There's a lot going on with oil and gas in the state of Ohio," said Tom Stewart, executive vice president of the Ohio Oil & Gas Association, a trade group based in Columbus. "Five years ago, no one was talking about it. But now shale is looked at as the resource rock that feeds oil and gas."
Eastern Ohio is part of the Utica Shale region, which also covers parts of Pennsylvania, New York and West Virginia. Stewart — a third-generation oil driller — pointed out that Ohio has been producing oil and gas for more than 150 years, even though it's not widely thought of as an oil and gas state.
He added that most recent Ohio shale activity has been in eight eastern counties. More than 1,000 drilling permits have been issued in that part of the state, with almost 700 wells drilled and almost 250 already producing.
The economic impact already has created 182,000 shale-based jobs in Ohio and has increased sales tax revenues in some counties by 20 percent. Jobs created by Ohio shale also command higher salaries than average jobs in the region.
"Monroe County was an economic desert, but now it's a great place to live," Stewart said, "and in Harrison County, they just about built a refinery overnight."
Industry analyst G. Allen Brooks agreed that the Utica Shale region "has a great deal of promise," adding that it's deeper than the neighboring Marcellus Shale and potentially could be as big as the successful Eagle Ford Shale field in Texas. To date, Utica gas wells haven't been as productive as those drilled in the Eagle Ford, but Brooks pointed out that the Utica is still being developed.
Brooks, managing director of the PPHB LP consulting firm in Houston, added that shale "already clearly has had an impact on Ohio, in the form of revenue for the state."
Both Brooks and David Hill, president of the David R. Hill Inc. consulting firm in Byesville, Ohio, agreed that shale-based petrochemicals and plastics plants proposed for the region could become reality, but that more detailed information was needed.
Shell Chemical has proposed building a massive petrochemicals unit – including polyethylene resin – near Pittsburgh, while a pair of smaller firms has discussed smaller operations in the Appalachian region of Ohio, Pennsylvania and West Virginia. None of those firms have announced definite plans for any investment or construction.
In spite of this potential, Stewart added that there's "a dark side" to shale, in that it's driven down natural gas prices while driving up demand for services and led to regulatory scrutiny. Part of this scrutiny resulted from an earthquake that occurred near Youngstown on Dec. 31, 2011. The quake measured 4.0 on the Richter scale but caused no major damage to the area.
The cause of the quake was traced to an injection well that was used to dispose of water used in hydraulic fracturing, a technology — commonly called "fracking" — which has enabled increased extraction of natural gas.
Stewart described the Youngstown incident as "one operator in one well, but people have tried to paint the industry (negatively) because of it."
Environmental impacts also have to be considered in developing shale gas in Ohio and elsewhere. Concerns about groundwater contamination already have been raised in several communities in the Utica region.
"Drilling and protecting the environment are not mutually exclusive concepts," Hill said. "I believe in American exceptionalism. Give us any problem and we can solve it."
Jack Shaner, president of the Columbus-based Ohio Environmental Council, added that he believes Ohio can have shale development that's mindful of the environment. "There are undeniable benefits from shale," he said, "but there also are undeniable and serious risks to air and water. We need to choose what we regulate and listen to the concerns of the public."
Natural gas developed from the Utica Shale, however, likely will use new pipelines, rather than older existing ones that would be more likely to leak, according to Robert Chase, a professor of petroleum engineering and geology at Marietta College. But Chase added that Ohio's shale development "has to be both good for the environment and economically acceptable to companies."
Hill also commented on the 2011 Youngstown quake, calling it "an unfortunate event," but adding that new regulations have been put in place to prevent a similar occurrence.
"Now, to site a class 2 injection well in an area with seismic activity in the past, you have to prove you don't have the same geological setting," he said. "Youngstown was a perfect storm of events. It happened and we fixed it."
Overall, speakers at the event gave the impression that the potential of Ohio's shale gas and oil output is worth taking on these challenges.
"Production is expected to dramatically ramp up in 2014 versus 2013," said Stewart, "and production will jump faster than others because of the experience from other shale plays.
"Our best interest is in the orderly development of this resource. I'm very happy to see it coming to the state of Ohio."