OUR THOUGHTS ON:

Regional Economic Impact of the Shell Cracker Plant

Energy & Resources|Manufacturing

By Nathaniel Novacco

In June 2016, Shell Oil Company, the U.S. subsidiary of the global oil and gas company Royal Dutch Shell, announced that it had selected a site in Beaver County, PA as the location of its new ethylene production plant. Ethylene, primarily used in plastics manufacturing, is the product of breaking apart (“cracking”) ethane molecules.  The location was selected, in part, due to its proximity to the Marcellus and Utica Shale formations. Natural gas companies in the region produce a surplus of ethane as a byproduct from drilling and fracking.

The construction of the plant, which is slated to being in Q4 of 2017, will bring approximately 6,000 construction jobs to the region. Once completed, early in the 2020s, the cracker plant is anticipated to support 600 full-time jobs. Though only grading activities have been performed at the plant location to date, the economic impact is already being felt. In neighboring Midland, PA, two concrete production facilities have been built and are currently operational. The concrete facilities will support 55 full-time jobs during the cracker plant construction. The Steamfitters Local 449 has increased its recruiting efforts through the use of open houses and offering of a tuition-free, 17-week apprentice training program. These efforts are an attempt to attract skilled tradespeople for the projected 450 welders needed to support the construction. In its 2017 budget, PennDOT allocated $55 million to 11 projects in Beaver County in order to improve or rehabilitate transportation infrastructure in anticipation of major cracker plant construction beginning near the end of 2017.

While the economic impact of the Shell plant cannot be understated, an even greater financial benefit could be on the horizon for Southwestern Pennsylvania. In 2017, the Commonwealth of Pennsylvania commissioned IHSMarkit, a global research firm used by 85% of the Global Fortune 500, to perform a study on ethane production in the region. According to its report, released this year, Pennsylvania Marcellus Shale ethane could support two cracker plants of similar size in addition to the Shell plant, without any additional drilling. While the Commonwealth of Pennsylvania is not currently negotiating with any other large gas companies for such plants, it is important to note Pittsburgh’s strategic location for ethylene production. Pittsburgh is located within 700 miles of 70% of North American ethylene customers.

It remains to be seen whether other multinational oil and gas companies will look to Southwestern, PA, but the lasting economic effect of the construction and operation of the Shell plant will be felt for decades to come.

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