Gas drillers' supply chain drives jobs
By Joe Napsha
Published: Thursday, Nov. 3, 2011
Companies that supply natural gas drillers with equipment and other services for use at wellheads and pipelines are expanding and adding jobs in Western Pennsylvania.
The latest is Valerus Compression Services LP of Houston, Texas, which opened a $4 million service center on Wednesday at the Fayette Business Park off Route 43 in Smithfield.
Valerus is one of about 175 companies in 10 counties that are part of the region's natural gas supply chain, said Dewitt Peart, president of the Pittsburgh Regional Alliance, an economic development group that is working to get more of those companies to move permanently to the region.
Valerus Compression worked in the region's gas fields for two years before deciding it needed a local home. Valerus looked at about 10 sites before selecting the Smithfield location, which is close to drilling activity, said Daniel Cannon, senior vice president of North American operations. Its new center in Smithfield industrial park is in a Keystone Opportunity Zone, which offers businesses reduced state and local taxes.
"We had equipment on the ground but no facilities. Our closest one was in Bridgman, Mich.," Cannon said.
"Valerus is a great example of what lies ahead, around the supply chain for the natural gas industry," Peart said.
Valerus opened the 21,000-square-foot center with a dozen employees to service compressors and 1,500-horsepower engines it leases to drilling companies. With strong growth projected in drilling in the Marcellus shale, Valerus expects to double employment next year, Cannon said.
The state counts 12,586 businesses being involved in Marcellus shale natural gas exploration, production and transmission services, employing about 193,800 workers as of March, according to the Center for Workforce Information and Analysis. Those companies are involved in activities such as natural gas distribution, water supply, site preparation and environmental remediation.
"There is a tremendous need for infrastructure support in this region. The compression and production aspect of the industry has a bigger long-term impact on the region than the drilling. The drilling is just one small portion," said Morris Mitchell, operations director for Waukesha-Pearce Industries Inc. of Houston, which distributes and services huge engines that run natural gas and oil field equipment.
Cannon said more jobs are possible if Valerus goes ahead with a plan to build another plant on 10 acres adjacent to its new center. Compressors that Valerus sells, rents and services are assembled at a base in Texas and shipped to Pennsylvania, he said. Another building would enable Valerus to assemble equipment here.
With more gas industry companies looking for space in the region, finding sites for them is becoming a challenge, development officials said.
"We're running out of pad-ready sites," said Michael Krajovic, president of Fay-Penn Economic Development County, a Fayette County economic development organization that helped persuade Valerus to open its Smithfield service center.
The Smithfield industrial park has a gas services plant operated by Chevron Corp., which acquired Atlas Energy this year for $3.2 billion, and another hydraulic fracturing services company.
Mitchell said his company is looking for a site in Western Pennsylvania to build a plant that would be close to drilling activity.
Companies that serve the gas industry want a 10- to 15-acre site with road and utilities in place, and developers will build it to their specifications, Peart said.
"The traffic has been good in terms of inquiries, but we're having difficulties finding space that they want," Peart said. "We don't have a large inventory of sites."
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