Marcellus Shale development puts state on map internationally
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In late February, Lou D'Amico found himself making his first trip out of North America, flying to Brussels to speak to the environmental committee of the European Parliament.
Mr. D'Amico is the executive director of the Pennsylvania Independent Oil and Gas Association, and spends his time figuring out how to grow the energy business within his state's borders.
But this trip found him way outside those borders, speaking to a Benetton ad of stakeholders in the shale global economy. Mr. D'Amico's tales of booming shale gas exploration in Pennsylvania's Marcellus Shale formation sounded like an instructional beacon of hope to some countries' representatives and a cautionary tale to others.
"You had France on one side, which prohibited fracking, and Poland on the other side, which is excited about the impact," said Mr. D'Amico.
He was joined by a professor from Carnegie Mellon University and a Polish engineer from Talisman Energy, the Calgary-based driller with significant acreage in Pennsylvania. While he was in Brussels, Mr. D'Amico received a request for an interview on shale from a Japanese news agency.
It's safe to say the natural gas rush in Pennsylvania is crossing the oceans.
Foreign firms and governments have expressed interest -- or offered investment -- nearly since the first Marcellus Shale rigs went up in 2006, but a stronger worldwide economy and new extraction technology has accelerated the trend in recent years. Major multinational firms like Chevron and Shell Oil have added Pennsylvania acreage to portfolios that include countries on nearly every continent.
The effect can be seen on a more local level as well. Land across Pennsylvania often has multiple owners, including major firms from Norway and India. Foreign firms already home to Pennsylvania are strategizing on how to get in on the game.
And industry groups like Mr. D'Amico's suddenly find themselves cast as the experts on how to build, develop and regulate a natural gas industry that they're still navigating themselves.
"What's going on in the natural gas industry is both a local story, but also part of a global energy story," said Kathryn Z. Klaber, president and executive director of the Marcellus Shale Coalition industry group. "It's evidence and re-enforcement that Pittsburgh is a global hub for innovation."
Take the case of Reliance Industries Ltd., the largest company in India and a major real estate presence in Pennsylvania.
Reliance Industries entered into a joint venture with Moon-based Atlas Energy in April 2010 worth $1.7 billion that gave the refining company 40 percent of more than 300,000 acres. That's $14,167 per acre.
Joint ventures with major firms have remained the popular way for foreign firms to invest in domestic shale acreage.
Foreign firms didn't waste time either -- the joint venture agreements started "fairly early in the game," said Mr. D'Amico.
Statoil Natural Gas LLC of Norway, for example, owns a 32.5 percent interest in 1.8 million acres of Chesapeake Energy land in the Marcellus region.
Companies aren't only interested in buying valuable acreage, Mr. D'Amico said.
"We're going to see a lot of it going into the infrastructure," he said. "Into the midstream operations, the chemical plants, all across the supply chain."
Last March, Statoil netted a deal with MarkWest Liberty to help handle processing and compressing treatments at MarkWest's facility in Houston, Pa.
The Appalachian area's combination of rural acreage and urban business districts makes possible the benefits of having field operations and regional headquarters in one place, said Ms. Klaber.
And foreign-based companies that were already here are expanding portfolios and strategically investing to include themselves in the shale sector.
"Well-known companies are finding their market opportunities as well," said Ms. Klaber.
Lanxess AG is to move its corporate headquarters from Leverkusen to Lufthansa in Germany in 2013, even as the chemical firm's local office has ramped up efforts to get involved in the natural gas development occurring around the company's American headquarters in Findlay.
In February, the firm announced a subsidiary was working with BioteQ Environmental Technologies of Canada to develop a way to treat acid mine drainage water, which could then be used in the water-heavy hydraulic fracturing process.
Hydraulic fracturing (or fracking) technology -- developed in Texas and used to shatter shale rock -- has opened up natural gas reserves around the country, and accounts for interest in places as far-flung as Israel and China.
Thanks to firms like Lanxess, systems to recycle the fracking flowback water have been where Pennsylvania "has made a mark" on the global shale technology stage, said Ms. Klaber.
Lanxess also intends to bolster production of other items used in the drilling process, such as friction reducers and corrosion inhibitors.
Randy Dearth, president and CEO of Lanxess Corp., didn't mince words when announcing the company strategy, saying, "We believe [shale development] will rejuvenate America's chemistry industry, strengthen U.S. manufacturing, boost exports, create jobs and significantly improve America's energy security."
And Bayer Corp., the German-based company with U.S. headquarters in Robinson, is offering land to build an ethylene plant that would process shale gas into plastics and other chemicals. Bayer is even a leaseholder itself, leasing about 1,400 acres last month in West Virginia to Houston-based Gastar Exploration Ltd.
Wall Street is also keeping an eye on Marcellus Shale production, with foreign firms taking center stage in the conjecture.
Range Resources, the Fort Worth, Texas-based driller with a majority of southwestern Pennsylvania acreage, is frequently cited as a possible takeover target for a foreign giant like British Petroleum of London.
At the very least, the increased attention means more jaunts abroad for industry representatives like Mr. D'Amico.
That trip to Brussels was the first stamp in his passport that didn't come from a trip to Niagara Falls.
Before the Marcellus era began, "My idea of going to a foreign country was flying to Houston," he said.
First Published March 20, 2012 12:00 am