Total shale-related investment in Ohio has reached nearly $78 billion since Cleveland State University first began tracking in 2011 – the year the state’s first Utica Shale wells went into production – according to the university’s latest report.
Prepared for JobsOhio, the report contains investment data through the second half of 2018. Continued success in the development of the Utica and Marcellus shale formations in the closing half of the year added $3.83 billion in total investments across the industry, making 2018 another banner year for the Buckeye State.
From the report:
“Total investment from July through December 2018 was approximately $3.8 billion, including upstream, midstream and downstream. Indirect downstream investment, such as development of new manufacturing as a result of lower energy costs, was not investigated as part of this study. Together with previous investment to date, cumulative oil and gas investment in Ohio through December of 2018 is estimated to be around $77.8 billion. Of this, $53.8 billion was in upstream, $19.5 billion in midstream, and $4.4 billion in downstream industries.” (emphasis added)
Upstream Production, Investments Continue to Climb
Last year, Ohio’s natural gas production continued to surge, as the state cleared a significant benchmark by producing 2.4 trillion cubic feet of natural gas – the first time the state has produced more than 2 Tcf since shale development began.
According to the CSU report, total shale-related investment in Ohio for the second half of 2018 – including upstream, midstream and downstream – was around $3.82 billion. Upstream activities, such as drilling or royalties, accounted for more than $3.5 billion of this total.
While the number of wells declined in the second half of the year, total investments were up, as improved practices in these formations have yielded better production results. From the report:
“The story of upstream development in the Utica continues to follow the theme of greater production from fewer wells, with laterals for new wells averaging more than 12,000 feet throughout the play. As determined from Ohio Department of Natural Resources Division of Oil and Gas (ODNR) data for shale well drilling, 117 new wells were drilled during the third and fourth quarters of 2018, 40 fewer than that drilled in the first half of the year. Yet ODNR production data indicate that the volume of gas-equivalent shale production in the second half of 2018 was 17.7 percent higher than in the first half.”
Upstream investments continue to be the driver of total investment in the state to date, and while the study found the second half of 2018 showed slowed growth in midstream and downstream investment, it forecasts significant increases in these segments as a number of large projects in various stages of development are not included in the report.
Midstream, Downstream to Pick Up Steam
Midstream investment figures included in the report include infrastructure built through 2018– “from gathering to the point of hydrocarbon distribution”; pipelines, processing, natural gas liquid storage, and intermodal transloading facilities.
While the report shows slowed growth in midstream investments in 2018, JobsOhio notes an impending increase as new projects began development this year:
“Ohio saw limited investment in midstream infrastructure with the total midstream investment for the second half of 2018 equaling $231.8 million. Investment consisted primarily of a gathering system build-out, with the most spent on gathering lines followed by a gathering system compression and dehydration. No new gas processing or fractionation was added during this period. However, several new pipeline projects commenced in 2019 and will be accounted for in future reports.”
2019 projects highlighted in the full report include:
All in all, across the Appalachian Basin more than $32 billion is being invested in pipelines. As downstream projects in 2019 and beyond come online, investment in the means to transport these resources will increase.
For the report, downstream investment figures are derived from projects deemed by CSU’s research team to be dependent on, or directly the result of, the large amount of oil and gas being developed in the region as a result of the Marcellus and Utica shale formations.
In recent years, Ohioans and their Shale Crescent neighbors in Pennsylvania and West Virginia have seen significant investment in the downstream sector, particularly as natural gas has become increasingly utilized as a source of electricity. Previous reports since 2015 showed the investment brought by 10 new natural gas-fired power plants in Ohio through the planning, construction, or newly operational stages.
No investment in new natural gas generation plants was identified during the second half of 2018, however low natural gas prices saw two new combined heat and power (CHP) plants with a total known capacity of 22.5 MW installed – not including one at Ohio State University that’s still in the approval process – accounting for approximately $44 million.
Looking ahead, JobsOhio points to the more than $1.5 billion worth of natural gas power plant construction occurring in 2019 at the South Field Energy facility in Columbiana County and the Long Ridge Energy center in Monroe County.
JobsOhio and CSU note a “pause” in new major pipeline, processing and petrochemical project construction during the study period account for the decrease in midstream and downstream investment figures. However, the report forecasts a quick increase in midstream and downstream investments considering the billions of dollars already invested in projects already underway or in the late planning stages.
Many see Ohio’s future opportunity for prosperity in the downstream investment the state is able to attract, as Matt Cybulski, Director of Energy and Chemicals at JobsOhio, states:
“As the upstream and midstream sectors continue to mature, our focus is to land more downstream investment. This strategy has two focal points: helping companies already in Ohio expand to take advantage of cheap natural gas and natural gas liquids, and attracting new greenfield developments such as ethane crackers, methanol plants and other related investments. These downstream projects result in significant amounts of construction jobs, are typically very capital intensive, and create high quality, long-term permanent jobs. Communities thrive when these facilities are opened or expanded and that is our long-term goal.” (emphasis added)
Since shale development kicked off in 2011, Ohio has seen levels of investment within its borders previously unthinkable in the decade prior..
Future growth in the region will be directly attributable to the success of the Appalachian tri-state region of Ohio, West Virginia and Pennsylvania harnessing its natural resources in the Utica and Marcellus shale formations. Previous studies of the “Shale Crescent” region by IHS and the Department of Energy forecast energy intensive industries like steel and petrochemicals will be attracted to the area thanks to the abundance of low-cost natural gas, natural gas liquids providing savings to industrial end-users, and its proximity to the marketplace.
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