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Analysts: Economic benefits of petrochemical plant could be huge

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Friday, March 16, 2012
 

If Shell Oil Co. builds a multibillion-dollar petrochemical plant in Beaver County, the Pittsburgh region could be to the natural gas industry what Houston and Dallas are to America's oil industry, an economist said on Thursday.

The economic benefits to Western Pennsylvania would go far beyond a single ethane "cracker" plant, potentially creating a boom in new manufacturing employment here, said Kurt Rankin, an economist with PNC Financial Services Group Inc.

"You could potentially see plastics manufacturing get a boost, but you need to outfit that plant and outfit the (natural gas) rigs and be able to supply what those operations need in order to remain in operation," Rankin said.

The region's manufacturing employment in general would "get a boost from natural gas in the coming decade," Rankin said.

Shell stressed that no decision to build the plant has been made. While it's been estimated that the plant, which would break down components of natural gas into the building blocks for plastics, could cost between $1 billion and $4 billion to build, the company has not said what it might spend.

Shell Oil is the U.S. subsidiary of Netherlands-based Royal Dutch Shell plc. Royal Dutch Shell CEO Peter Voser told an energy industry conference in Houston this month that it could be years before the company green-lights the plant.

"There are many hurdles to clear before we can even take an investment decision to build the proposed petrochemical complex," Dan Carlson, general manager of new business development for Shell Chemicals, said yesterday.

"We need to confirm the suitability of the site, secure ethane feedstock supply, complete the engineering and design work, confirm the support of customers for our products, receive all the necessary permits and confirm that the project is economically robust and competitive."

Despite those hedges, some local officials said just having the Pittsburgh region picked for the Shell plant is a major accomplishment.

"Today's announcement is historic," said Dennis Yablonsky, CEO of the Allegheny Conference on Community Development, the region's lead economic development agency. "This project will be the single largest 'from-the-ground-up' industrial investment in the Pittsburgh region in a generation."

With the decline of the steel industry around Pittsburgh in recent decades, the region has promoted itself as a hotbed for jobs in education, medicine and technology. But manufacturing remains an important and vital part of the economy, said David N. Taylor, executive director of the Pennsylvania Manufacturers' Association.

There is "tremendous opportunity" for Western Pennsylvania to attract manufacturing companies that want both inexpensive energy from natural gas and will make products from what Shell produces, such as plastics, pharmaceuticals and paints, Taylor said.

Construction of the plant could support thousands of highly skilled jobs, state Rep. Robert Matzie, D-Beaver County, said in touting the potential economic benefits.

The spinoff effects of the plant could support more than 10,000 permanent jobs in the chemical industry in the state, according to the American Chemistry Council, an industry group.

Along with the addition of high-paying jobs at Shell, which the council has estimated could average $70,000 a year, there is the possibility of more manufacturing jobs being created at companies that either support the plant or buy its materials, said Frank Gamrat, an economist with the Allegheny Institute for Public Policy in Castle Shannon. And those jobs have a good "multiplier effect" in the community, meaning the pay is high enough that the workers' spending supports many more jobs at restaurants, retailers and other businesses, he said.

The impact should spread beyond just the Pittsburgh region, said Kathryn Klaber, president of the Marcellus Shale Coalition, which represents natural gas companies.

"While located in Pennsylvania, the supply chain and potential economic impact of this project will span the multi-state region while serving as an anchor in the resurgence of the domestic manufacturing sector," she said.

Aliquippa had been portrayed as the front-runner in the county for the cracker plant, on former LTV Steel property owned by developer Charles J. Betters, but officials said that community will likely benefit as well, as related businesses usually spring up near cracker plants.

Betters said he was not disappointed and was aware that Shell had been looking at the Horsehead site.

"However it got to Beaver County, it doesn't matter as long as it wound up there," Betters said.

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