Ohio Officials Use Geography as Downstream Selling Point

“Location, location, location” has long been a mantra in real estate, but comments from officials with a stake in growing Ohio’s economy suggest the phrase nicely sums up the Buckeye State’s appeal to the downstream oil and gas industry as well.

“Ohio is a great place to be and JobsOhio and our partners will continue to leverage the oil and gas surplus of the Utica and Marcellus shale plays to build the state’s economy and drive capital investment,” David Mustine, senior advisor with the private economic development non-profit corporation JobsOhio, told DownstreamToday. Easy access to feedstocks from the Utica and Marcellus notwithstanding, Ohio enjoys “unparalleled access to customer markets” because it is located within a day’s drive to much of the U.S. population, he added.

Trades, Skilled Workers: Ohio Needs You!

Nearly $7 billion in proposed shale gas projects in Ohio would add approximately $4.9 billion to the state’s already significant chemical industry output, Jenn Klein, president of the Ohio Chemistry Technology Council (OCTC), told DownstreamToday. The new shale gas investment would support 17,000-plus jobs, more than 4,000 of which are directly tied to the business of chemistry, she added.

“Ohio has over 100,000 employees in chemical, plastic, and rubber manufacturing and we are the number one employer in plastics, rubber and adhesives in the country,” said Matt Waldo, senior manager of research with JobsOhio. “Over the last three years we have seen an increase in employment in this sector by approximately 4.6 percent, we expect this trend to continue and potentially to increase.”

JobsOhio anticipates ongoing healthy demand for workers, and demand is strongest for the trades and skilled workers, according to David Mustine, senior adviser with the organization.

“There are approximately 95,000 skilled workers currently ready to fill the needs of businesses in this continually developing sector,” he said. “JobsOhio and our partners are working with companies to address talent needs through marketing, sourcing talent and promoting the state’s education and training assets.”

Some of JobsOhio’s partners in developing the state’s downstream sector include PolymerOhio, the Edison Center for Advanced Materials and Polymers, the University of Akron’s College of Polymer Science and Engineering and the National Polymer Innovation Center, Mustine concluded.

“Ohio’s spot price of natural gas – and related materials – is more than 40 percent lower than the Eastern U.S. average,” continued Matt Waldo, senior manager of research with JobsOhio. “This fuels Ohio’s tremendous downstream demand. To that end, Ohio has the number one aerospace supplier presence in the U.S. and is number two in automotive production.”

One high-profile downstream project in Ohio is PTT Global Chemical’s proposed world-scale ethane cracker, which would be built in Belmont County in the southeast corner of the state. Although that proposal has generated much enthusiasm among the state’s oil and gas community, Mustine and Ohio Oil and Gas Association (OOGA)Executive Vice President Shawn Bennett see potential for significantly more downstream investment. Read on for their insights regarding downstream opportunities in the Buckeye State.

DownstreamToday: What do you see as the biggest downstream growth opportunities in Ohio?

David Mustine: Ohio is ideally located for the development of ethylene crackers and polyolefin production facilities, natural gas-fired power plants, butylene, methanol, ammonia plants and continued refinery upgrades for Utica condensates. Ultimately we expect growth in the plastics, coatings and specialty chemicals industries.

Shawn Bennett: Ohio has an opportunity to help our manufacturing industry grow through an abundant supply of low-cost natural gas that the oil and gas industry has been successfully developing over the last few years.

In addition to manufacturing, Ohio’s robust chemical industry can expand its utilization of natural gas liquids and crude oil developed in the Appalachian Basin.  This is one of the reasons why an ethane cracker in the Appalachian Basin is so important.  We have the opportunity to not only grow those existing businesses, but also to attract new ones.

DownstreamToday: Which aspects of the oil and gas value chain do you consider most attractive/well developed for downstream companies? Where do gaps exist, and what’s being done to address them?

Mustine: As confirmed by a 2015 Cleveland State University study, our region’s abundant supply of cost competitive feedstock strongly positions Ohio to attract ethylene crackers and natural gas-fired power plants.  We have four new gas-fired power plants that are under construction.

We continue to see gaps in shovel-ready sites for large energy users and processors.  JobsOhio and its regional partners have recognized this issue and are taking action to address it.  This year JobsOhio rolled-out the SiteOhio certification program to increase the state’s portfolio of available industrial, manufacturing and commercial locations.  The program will help fill the information gaps in Ohio’s available sites portfolio, and identify, certify and market eligible project sites that are ready for immediate development by business prospects.

Our regional partner, the Appalachian Partnership for Economic Growth (APEG) is supporting this effort with the creation of and real time updates to its Ohio River Sites database.  The Ohio River is a tremendous asset that supports electric generation and polymer manufacturing facilities. JobsOhio and our partners will continue to market it.

The BP-Husky Refinery near Toledo. Photo by Anna Duee, JobsOhio.
The BP-Husky Refinery near Toledo. SOURCE: Anna Duee, JobsOhio.

Another gap worth mentioning is the information gap.  From an economic development perspective, it is absolutely critical that job creators are aware of the long-term potential Ohio’s natural gas resources present.  It was to this end that JobsOhio supported a study by Cleveland State University that provided clear and transparent data on the wide range of downstream opportunities that result from the Utica Shale play.

DownstreamToday: As you know, the Gulf Coast boasts much of the United States’ refining and petrochemicals capacity. What can Ohio offer that the Gulf Coast cannot or does not, and what sort of niche do you see the Buckeye State carving out for itself?

Bennett: We have companies that develop plastics, rubber and personal care products already located in this state.  In fact, Ohio ranks first among the fifty states in the production of rubber and plastic products.  If we can give companies access to the materials they need to make their products without dealing with transportation costs in the Gulf that would be incredibly attractive to many of those companies. Also, 47 percent of the U.S. population is accessible within a day of trucking of Ohio, which is attractive to new companies looking to cut their transportation costs.

Propylene Tank Cars
Rail tank cars carrying propylene parked near Midwest Terminals in Toledo. SOURCE: Matthew Veazey, DownstreamToday.

Mustine: Ohio is strategically located, not only in regard to access to resources, but also in proximity to customer markets, and feedstock prices are lower here.  Ohio companies are at the center of 22 percent of the North America polyolefin market, posing a huge logistical advantage. Ohio is first in the United States in polymer and rubber output, thus allowing for direct collaboration between producers and their customers.

DownstreamToday: Economic development officials in Ohio, Pennsylvania and West Virginia are taking a regional approach to certain aspects of growing the downstream sector. In this context, when does it make more sense to collaborate with regional partners instead of simply focusing on an individual state?

Mustine: This is a regional opportunity.  As evidenced by the Cleveland State University Study, the Utica and Marcellus region has the capacity to support the development of three or more cracker facilitates, this positions the region well for strong growth in downstream opportunities.

Ohio, West Virginia and Pennsylvania are working together on workforce, regulation and marketing efforts to foster business development in the region.

Bennett: Our industry is successful at developing oil and gas.  While we encourage and support their efforts, growing the downstream sector and collaborating with other states is a primary focus of economic development officials at JobsOhio and their counterparts in the region. From a very general standpoint, all of these states will benefit from increased economic activities due to increased low cost energy supplies and residual business growth.

Ohio Downstream Facilities
Downstream facilities in Ohio
From Downstream Today  |  June 10, 2016