October 17, 2016

A Look at the Future — Utica Summit IV and Midstream PA 2016

by Joe Barone, Shale Directories in Business Information

Two seminars provided considerable information about what is coming as the result of the cracker plants and midstream activity in PA, OH and WV.  If you missed either of these seminars, you missed information and some opportunities.

Utica Summit IV:

  • China is done. It was brought to our attention by a couple of the speakers that China will not be able to compete in the plastics industry for the following reasons:

o          The low cost of energy and feedstock makes it impossible to compete with plastics manufacturers in the U.S.

o          China has a demographics problem.  The one-baby policy is now adversely affecting its workforce.  There will not be enough workers in the future.  Second, the workers in today’s workforce are moving into the middle class and want higher salaries

  • Onshoring is happening. Two recent announcements indicate the impact of low cost energy and feedstock.  Look for more announcements like this in the future.

o          Armstrong Flooring is dismantling all of its manufacturing in China and returning it to Lancaster County, PA.

o          U.S. Menthol is dismantling its plant in Chile and is moving it to WV where it will build another plant.

  • Where will we get the workers? The discussion of the two planned world-class cracker plants led to the major question, “Where will we get the workers to build the cracker plants?” A panel of union leaders and educators discussed their efforts to recruit/enroll recent high school graduates in to their respective programs.

The most quoted number of workers required to build these two cracker plants is 6,000 workers per plant.  I think workers from outside the region will have to be brought into the Appalachian Basin to get these crackers up and running.

Midstream PA

  • RUMORS. Everyone finds the rumors interesting so we’ll start with them.

o          Chief has signed MSA’s for two rigs which it will be bringing up to PA and is close to signing a third MSA for another rig.

o          Inflection Energy is bringing a rig up to PA and will start drilling after the first of the year.  It’ll be the only rig in Lycoming County, PA.

o          When the Shell cracker plant is full construction, there will be between 180 to 250 cranes on the site at one time.  That’s almost unimaginable.

o          Talisman has been very active in obtaining permits in Tioga County, PA over the last couple of months. In fact, it just received five more permits that past week.

It has not brought any rigs up.  Talisman was purchased by Repsol, a Spanish energy company, in 2015.  The Talisman name will be changed to Repsol in early 2017.  Then, it will be bringing rigs up to Tioga County, PA.

  • Everyone is busy. I spoke with a number of companies and all of them are busy.  All the projects that were delayed are now coming back to life and the work needs to be immediately.
  • Where are the workers? Workers are needed for companies working in upstream and midstream.  Many of the workers who left the industry with the down turn are not coming back.  It’s going to be a challenge for many of these companies.  Worker issue is exactly what I heard in OH.  Workers from outside the Appalachian Basin will be needed in all facets of upstream, midstream and downstream over the next few years.
  • The O&G industry needs your support. As I said in my opening remarks, three pipelines, Atlantic Sunrise, Mariner East 2, and PennEast represent over $6 billion in business that’s waiting for final approvals.  You can support these projects and other industry initiatives by attending local county commissioner meetings, FERC and PA DEP hearings as well as talking to your local government officials.  Speaking positively to family, friends and business associates is also effective. Inform, support and, speak up and show-up.
  • PA is pushing energy assets. Denise Brinley, Strategic Initiatives, PA Department of Community & Economic Development, strongly emphasized the Commonwealth’s programs to bring downstream petrochemical companies into PA.  Old coal burning facilities and steel plants are ideal locations because of rail, road and water.
  • Could a second cracker plant becoming to PA? Brinley commented the former Wheeling–Pittsburgh Steel site in Allenport, PA is being promoted to global chemical companies.
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