Shell’s ethane cracker brings $6B boost to Pittsburgh region

Adam Pope Adam Pope

For Dennis Yablonsky, the Shell Chemicals ethane cracker plant in Beaver County is more than just a $6 billion infusion into the western Pennsylvania economy. It’s the beginning of a manufacturing resurgence for the region.

“The more we use our natural gas in the region, the more of the economic value we gain from it versus shipping it all out of here,” the former CEO of the Allegheny Conference on Community Development said during a recent interview.

 

Midstream natural gas investment: More work to be done

The upstream natural gas sector has been great to Pennsylvania since 2004, when Range Resources drilled that first well in the Marcellus Shale. However, while Pennsylvania has made strides in attracting more midstream investment, Yablonsky said, there’s more work to be done in the area, especially because billions of dollars are on the table.

“It doesn’t get a lot of play, but those billions of dollars create jobs, create purchases in the supply chain and, most importantly, it creates a network that will allow us to, when we get the gas out of the ground, get it to where the users can be,” Yablonsky said.

What would help in attracting more from the midstream sector is an ethane storage hub. A West Virginia University report found several sites in the tri-state area of Ohio, West Virginia and Pennsylvania that could support such a hub.

“There’s investment that would have to be made there, but more ethane storage would be a real positive development for us on the infrastructure side as well,” Yablonsky said.

Downstream natural gas investment: The last great frontier

Pennsylvania, Ohio and West Virginia have not been the best at capturing the attention of downstream companies. It goes back to the point about natural gas use equating to a higher economic value. Yablonsky said if the desire is to have companies come to the region and stay, then as far as natural gas goes, the state needs to “use it or lose it.”

Yablonsky said Pennsylvania cannot rely strictly on wells and pipelines. “If all we do is take the gas out of the ground, separate it into its component parts, store it and then pipeline it out of here for use in other parts of the country or the world, this will be a temporary benefit that will not give us the full value we deserve,” he said.

Western Pennsylvania can get that full value, Yablonsky said, but it’s contingent on attracting more petrochemical and other downstream companies to the region. This might not be as difficult a task as it sounds. The area is lucrative to these companies, as Shell Chemicals’ investment has demonstrated, because of the proximity to desired customer bases.

“If you draw a 700-mile circle around Beaver County, you have [a radius containing] 70 percent of their customers,” Yablonsky said about one of Shell’s key reasons to locate its cracker plant in Beaver County.

Thailand-based PTT Global recently purchased 168 acres in Belmont County, Ohio, to build another ethane cracker plant. Yablonsky said PTT is locating there for the same reason as Shell: proximity to customers and resources.

The Shell and PTT investments put the region in the “first or second inning of the downstream game,” Yablonsky said, but it’s still early.

“This whole resurgence of manufacturing, as a result of our God-given natural gas resource, is a real blessing for the region,” Yablonsky said.

Looking back on natural gas growth

Yablonsky announced his retirement from the Allegheny Conference this year. Before his time as CEO, he was Pennsylvania Department of Community and Economic Development (DCED) secretary from 2003 to 2008. He has seen the natural gas industry grow from humble beginnings to one of the five key industries in Pennsylvania, according to the DCED.

What has impressed him the most about the industry is the innovation.

“The technology and processes they use today to drill wells is very different than what it was 10 years ago,” Yablonsky said. “They’re able to go deeper and wider laterals, be more precise in terms of what they’re looking for and generate more productive wells than they ever were before.”

Another thing that has impressed him is the industry’s ability to help others.

“We’ve provided a good job with benefits with a career path for people that never had it before,” Yablonsky said when talking about ShaleNET, a government-funded program to help job seekers find positions in the natural gas industry. “That’s not a story that gets told much about this industry.”

Adam Pope Adam Pope

Adam Pope is Senior Director of Bravo Group's Pittsburgh office. With extensive background in energy and experience in the public and private sector, Adam provides a comprehensive perspective on the industry landscape.

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