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Cracker plants were the main topic of discussion at the Utica Summit IV hosted by the Canton Regional Chamber of Commerce in October.
Representatives from different aspects of the gas and oil upstream production cycle were at the summit to discuss with Stark County area businesses what is ahead for the industry from their perspectives.
Cracker plants take gas and turn it into ethylene which then is used in the polymer industry to create plastics used for products such as medical supplies, wire coating, vehicle parts and more.
In the summer Shell announced its plan to build a cracker plant in Pennsylvania, along the Ohio river. With the natural gas and oil harvested from the Utica region in eastern Ohio, industry expert Tom Gellrich of Topline Analytics, said Ohio has a lot to look forward to.
Rather than depending on the middle east for gas and oil, the U.S. is not only self-sustaining with its supply, but it is on the verge of becoming a major exporter, he said.
“The norm that we grew up with in petrochemical has been totally obliterated. It’s not even close, it’s not a ten percent difference, it’s a two or three-fold difference,” he said.
According to the American Chemistry Council, Gellrich explained, over $160 billion in capital is invested in the U.S. gas and oil market, 60 percent of which is from foreign countries.
Polyethylene economics will also experience benefits from the oil and gas surplus in the U.S., he explained.
“There is a demand for four to five new cracker plants per year in the world and why shouldn’t they be located here in a low-cost region,” he said.
The need is coming from the Asian middle class, which is growing quickly. The chemicals and more finished, manufactured products will be shipped there.
The Appalachian area is a great place for the cracker plants, he said, because of the growing labor pool, low transportation costs and because it is an EPA non-attainment area.
Gellrich predicted 6 cracker plants in the Utica region. Each cracker plant, according to Joe C. Eddy of Eagle Manufacturing which relies on ethylene from cracker plants to create plastic products, will each generate about $330 million per year in economic activity.
Shell will be live in the next four years. Gellrich said Shell executives he has spoken to assure him that they are working as fast as possible since every day the cracker plant is in operation it generates $1 million in revenue.
MarkWest Company, a sister company to Marathon is located in Cadiz, Ohio. VP of Operations for the Appalachian and Utica region of the company David Ledonne oversees a company that has ethane they cannot use right now.
Ethane is a fuel used by cracker plants. Ledonne said with a cracker plant in the area MarkWest could sell their ethane to the cracker plant which would allow them to produce more natural gas and gasoline.
Right now, Ledonne said, there is no local storage for the ethane they take out of fuel processes in the plant, so they reject most of it to the tune of 70,000 to 80,000 barrels of ethane per day.
“There is a significant amount of ethane, we believe, in these shale plays for quite a long time,” he said.
If ethane is stored locally and turned into ethylene locally at a cracker plant, local plastics companies might as well benefit from the supply.
Stan Glover, sales manager for Zeiger Industries in Canton travels all over the world selling the plastics used to create thousands of products.
The plastics industry is known as being downstream, a market that comes from the gas and oil industry.
He sees the plastics industry expanding exponentially over the coming years and a demand globally for the products.
“The surge in natural gas production has reversed the force of the U.S. plastic industry...With the announcement that Shell is coming in a whole new level of productivity is coming,” he said.
Total there will be $47 billion in investment over the next decade put into the plastics industry due to the success of the shale play, he said.
The plastics processing industry currently employ 940,000 people directly in the U.S. and operates over 16,800 facilities in all 50 states.
One of the needs he sees the plastics industry having to prepare is new talent.
“We can’t find talent. We don’t know how to find talent. We are talking about millennialls,” he said.
Zeiger, he said, is spending time with demographers to find out how to tap into that generation to take over the industry in the future.
Another industry that has popped up due to the local gas and oil industry is in private power companies like South Field Energy in Columbiana County.
Zac Gordon, project manager at Southfield Energy spoke about what made the Ohio Utica region ideal for the Boston-based company.
It was the de-regulated market in Ohio, a high capacity market and a shale dome with “unprecedented opportunity” that made Ohio the ideal place in the country to place a power generator.
Southfield Energy plant will be a 1,100-megawatt power generator, the equivalent of over 1 million residential homes.
Southfield will be online in about three years. The company of about 30 employees has invested $2 billion in the U.S. in power plants. They have another located in Caroll County.