Drawing up a blueprint for regional companies that want to capture the lucrative business opportunities brought on by rampant Marcellus Shale oil and natural gas development in Pennsylvania, University of Pittsburgh researchers this month released a Pitt Business Working Paper titled "Understanding the Marcellus Shale Supply Chain."
Researchers at the school's Joseph M. Katz Graduate School of Business and College of Business Administration's Institute for Entrepreneurial Excellence (IEE) said the study is aimed at helping regional businesses understand potential direct and indirect opportunities in the Marcellus Shale exploration supply chain. It identifies the supply chain's phases from exploration, leasing, acquisition, permitting, site construction and drilling to hydraulic fracturing, extraction, production, transport, processing, storage, distribution and marketing.
"The study was undertaken to help companies better understand the various components of the shale industry and to examine the macroeconomic forces that impact the supply and demand of the industry," said Shaun M. Seydor, associate director of the University of Pittsburgh school. "The study goes beyond the physical drilling."
However, for companies that want to break into the Marcellus Shale boom, there are certain requirements, Seydor found. He said the report identified the most successful businesses within the supply chain as having excellent safety records and strong balance sheets and being responsive and flexible.
The study identified actions a prospective supply company could take as entrance is considered to the Marcellus Shale supply chain. They include:
"By understanding the broad economic forces at play, understanding the complexities and progression of the supply chain itself, and then understanding the proper background and characteristics for participants, regional businesses and manufacturers may be better positioned to participate in the Marcellus Shale development," the authors said.
Funded by Catalyst Connection -- a nonprofit consulting group that aims to advance the performance of manufacturing companies in Southwestern Pennsylvania -- and authored by Seydor, IEE management consultant Eric Clements, and IEE graduate student consultants Spyros Pantelemonitis and Vinay Deshpande, as well as MBA students in a Spring 2012 project course, the research is a compilation and analysis of public information, industry expert interviews, and feedback from industry and supply chain companies.
Catalyst Connection Managing Director of Business Growth Services Connie Palucka said the report was developed with small and midsized manufacturers in mind, especially those interested in realigning their existing businesses to include the shale industry.
"We wanted to provide a resource for businesses interested in learning about the requirements to become a supplier and the expectations of owners and contractors in this industry," Palucka said. "This is an effort to build a repository of market research for our region's businesses."