Since I’m here in Ohio, why not talk about what makes this region so unique. Today, we’ll be discussing how shale in Ohio has propelled economic growth in an unfamiliar way.
For most of America, the shale sector looks fairly similar – traditional oil production produces natural gas as a byproduct, which is flared off until infrastructure is put in place to harness it. However, the Marcellus and Utica fields in Ohio primarily produce natural gas that is used for fuel across the central and eastern US. This is a bigger deal than it seems. If the tri-state area of Ohio, West Virginia and Pennsylvania were a country, it would produce more natural gas than any countries save Russia and the United States itself.
But what truly sets the region apart isn’t simply the abundance of natural gas, but of natural gas liquids such as ethane, propane and butane. The local prevalence of these materials has enabled Ohio to become a world leader in high-end plastics manufacturing. Thanks to this, Ohio has seen boosts in industrial activity and the establishment of chemical facilities throughout the state.
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Hey, everybody. Peter Zeihan here. Coming to you from just outside historic Harbor Village, just across the river from Marietta, Ohio. And that is the Ohio River behind me. Today, we’re going to be talking about something that is an exception from the exception. So the big exception is the American shale sector, because it has a different economic structure and uses different technologies for most oil production in the rest of the world and as a result has very low production costs and produces a lot of natural gas as a byproduct of oil production.
So when you’re in Texas, most notably, say, the Permian people are after the crude oil and then natural gas comes up as a byproduct and they have to flare that natural gas until the infrastructure can be built out to absorb it and bring it into, say, the chemical sector here in Ohio and moving into Pittsburgh, big area in Pennsylvania, you’ve got a different problem.
The natural gas field is the Marcellus and the Utica, and they are dry gas fields where people are after the natural gas rather than the liquids, because they’re using it for fuel in every place from Chicago to Boston to Washington, D.C. And so they need it for electricity. But there are still liquids here, especially in the western parts of the play, which move into, say, Ohio.
They’re you’re getting a fair percentage of something called natural gas liquids, which in layman’s terms means things like propane and butane. That means that in this part of the country, it’s not just that the natural gas is cheap because the production costs in the Marcellus are very low. But so many end girls come out of places like the Utica play that Ohio has become a world leader in things like high end plastics, because for them, it’s not the oil that’s the waste product, it’s the propane and such.
That is a primary feedstock into chemicals specifically for things like plastics. And so we’re seeing dozens of chemical facilities that do secondary processing popping up in the more populated parts of Ohio, taking advantage of what is basically below global cost inputs of things like ethylene, propane, butane and the rest. So here we are in the middle of the continent and we’re suddenly seeing an explosion in industrial activity for something that we normally associate with the Chinese coast, the Persian Gulf or the Texas coast.
Very different situation, very different geology, very different outcomes.
