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Industry Says Utica Shale Reviving Ohio Manufacturing

As Ohio awaits results of preliminary Utica Shale wells, industry leaders told an audience in Columbus last week that the play, if successful, could revive the state's manufacturing sector.

"If you had to define Ohio, you'd say: We make things...The reason we make things in Ohio is because we were always blessed with natural resources," Jerry James, president of the Ohio Oil and Gas Association, said at the Ohio Governor's 21st Century Energy & Economic Summit last Wednesday.

Noting that Ohio birthed Marathon Oil Co. and the mighty Standard Oil Co. and once led the world in oil production, James said energy booms have always preceded manufacturing booms and the Utica promises the same benefits that coal and conventional oil and natural gas brought a century ago.

Drilling alone would be a major employment engine, according to Chesapeake Energy Corp. CEO Aubrey McClendon, who pegged the Utica's worth at $500 billion and called it the "biggest thing economically to hit Ohio, since maybe the plow" (see Shale Daily, Sept. 22). He believes the Utica could attract more than 100 rigs at any given time during the peak of development, and he estimated that each rig would be responsible for about 200 jobs.

For that reason, McClendon often says wells are really "factories."

"Those are factories that work 24 hours a day. They never shut. They're not susceptible to competition from China or from any other place in the world. They pay great wages," McClendon said, repeating his common refrain that the industry hires everyone from doctorate holders to high school dropouts.

Those 2,000 potential jobs, though, would only be a fraction of the employment boost offered by the Utica, if projections materialize. The Ohio Oil & Gas Energy Education Program recently estimated that the Utica could create more than 200,000 jobs in Ohio by 2015 (see Shale Daily, Sept. 23).

Those jobs would extend beyond the drill bit, according to Karen Wright, CEO of Ariel Corp., a natural gas compressor manufacturing firm. "What this means for us is a tremendous amount of business," Wright said, noting that every well eventually needs a compressor as pressures drop.

Ariel employed 1,350 people when domestic drilling activity topped 2,000 rigs in 2008, and while the current rig count is shy of that peak, it is expected to top 2,100 by the end of the year, she said. With as many as 59,000 wells drilled this year, "We're currently having some difficulty in finding the workforce that we need to grow at the rate that the market is requiring us to grow," Wright said, leading the company to partner with a local technical college to help train and expand the workforce.

Wright said Ohio is still the third largest manufacturing state in the country and said her company maintains works with 73 existing suppliers in the state that would also benefit from the Utica. "You have a tremendous ripple effect," she said.

The potential size of the Utica, and its big brother the Marcellus Shale, suggest decades of production growth, according to Doug Matthews, senior vice president of tubular operations for U.S. Steel Corp. After decades of watching domestic production move south and west, the Lorain Tubular Operations just outside of Cleveland is now poised to be a competitive regional source of pipe and tube, he said.

"It gave us a business certainty to be able to make a significant capital investment," Matthews said.

The relationship between steel and energy is symbiotic. The steel industry produces the pipe and tube products used for wells and pipelines and in turn is one of the industrial users of energy in the country.

That existing business infrastructure could allow Ohio to keep pace with the Utica, according to Jack Miller, CEO of Ken Miller Supply Inc., a oilfield supply company focused on the Appalachian Basin. Even without significant activity yet in Ohio, shale development in Pennsylvania and West Virginia is already accounting for 70% of the company's business and appears poised to increase, he said.

When it comes to the water -- a crucial tool and a tricky byproduct of shale development -- Ohio is as rich as its neighbors, but able to dispose in a way they cannot, Miller said. The geology of Ohio allows the state to maintain hundreds of deep injection wells while Pennsylvania counts only a handful.

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