If West Virginia and the broader region encompassing the Marcellus and Utica shales take advantage of value-added opportunities associated with natural gas -- in the manufacturing, transportation and electricity generation sectors -- a greater share of the economic benefits of the shale boom will be retained by the region, according to a report issued by Vision Shared, a the Huntington, WV-based nonprofit organization. But significant investment is needed upfront to make that happen.
"The significant reserves and resulting production of natural gas [and ultimately the NGL (natural gas liquids) components] from the Marcellus Shale has lowered the price of, and increased the demand for, the commodity. Substantial regional and market impacts are underway and are likely to continue. As such, the consideration of approaches to grow regional supply, infrastructure and capacity for value-added natural gas products is necessary to preserve more of the economic benefits of the resource in the region," according to the 45-page report, which was authored by researchers at the Marshall University Center for Business and Economic Research.
As many as seven new ethane crackers may be needed in North America, and while West Virginia and the entire Marcellus region stand to benefit due to resource proximity, investment decisions "will be based on many other supply and demand conditions," according to the researchers.
"If the West Virginia region were able to retain more of the whole value chain by producing more intermediate or final products from the NGL feedstock instead of exporting the raw materials, more economic value would be retained...
"The primary or overarching benefit of utilizing the products of natural gas liquids in the region is that more of their economic value is retained. For these industries, the presence of the primary feedstock processor means the presence of other facilities to use the intermediate product, i.e. ethylene, to make another intermediate product."
West Virginia has been competing with Pennsylvania for ethane cracker investment (see Shale Daily, July 18, 2012). At least four companies have expressed an interest in building crackers in West Virginia (see Shale Daily, March 21, 2012). A subsidiary of Royal Dutch Shell plc has taken steps toward construction of a "world scale" ethane cracker in western Pennsylvania, but has yet to make a final decision about the project (see Shale Daily, April 30).
"Significant upfront investments" in natural gas transmission, transportation access and refueling infrastructure are all needed for the state to fully take advantage of natural gas in the transportation sector, but the risk "has the potential to be spread out through the use of public-private partnerships," said the report. "Failure to produce this infrastructure likely limits the potential to employ value-added opportunities to niche or regionally-bound markets."