Economic studies are necessary for regions trying to get their collective arms around strengths and weaknesses — to get the most of what they’ve been blessed with or which can be developed.
Many times costing thousands of dollars, taking months to complete, involving hundreds of man-hours in assembling, many such studies end up being used for one of two purposes unrelated to their original calling:
As a doorstop, or a bookend.
Take the lead
One big reason studies are tossed on the proverbial bonepile to gather dust is no one is willing to step forward and say “This makes sense, this is the way we should go – we need to move forward now.”
This past July, consulting/analytics giant McKinsey & Co. revealed its work to the people who commissioned its 65-page study.
“Forge the Future: Pennsylvania’s Path to an Advanced, Energy-Enabled Economy,” lays out in detail how the state makes the most of being blessed with the Marcellus and Utica Shale plays resting hundreds of feet under its surface.
And this study may actually be put to good use because it does have leaders – private-sector leaders — willing to follow its path to success.
Stacey Olson, president of oil supermajor Chevron’s Chevron-Appalachia unit, and Morgan O’Brien, president/CEO of the largest natural gas local distribution company (LDC) in Pennsylvania, Peoples Gas, introduced the study to a large crowd attending the recent Shale Insight conference in Pittsburgh.
The two-day program was presented by the Marcellus Shale Coalition, the Ohio Oil and Gas Association, and the West Virginia Oil and Natural Gas Association. Kallanish Energy was in attendance.
“No one now is looking forward – no one is taking the lead in leading this region forward,” O’Brien said. “This study looks ahead to what we do with natural gas when it comes out of the ground.”
“Forge the Future” shows how “to unlock the economic potential of Pennsylvania’s energy resource – in terms of GDP growth, jobs growth, and government revenues to support the needs of the state,” McKinsey wrote.
The study states Pennsylvania can achieve concrete economic benefits through three development strategies: Increased gas-fired power and heating, ensuring all Pennsylvanians benefit from low-cost gas for residential and commercial/industrial users; clusters (of plants) tied to petrochemicals, advanced materials, and data-driven automated manufacturing, driving GDP and jobs growth and positioning Pennsylvania as an “Industry 4.0 manufacturing leader”; and natural gas exports, “crucial to make gas production viable, without hurting competitive gas prices in state.”
Pursuing this approach would create substantial, enduring benefits for all Pennsylvanians, McKinsey hypothesizes. By 2025, Pennsylvania could uplift its economic performance above the “take no action” level by: $60 billion, roughly 6-9% growth in annual state GDP over about 10 years, from approximately $720 billion in 2025 (under a business-as-usual scenario), to roughly $780 billion by pursuing targeted growth actions (increase from 1.6% to 2.3% in average annual growth rate); add more than 100,000 jobs, a roughly 1-2% increase over about 10 years, from approximately 6.2 million jobs in 2025 (under a business-as-usual scenario), to about 6.3 million jobs by pursuing targeted growth actions (increase from 0.65% to 0.85% in average annual growth rate).
World class petchem hub
Among the McKinsey report’s other recommendations:
- Build roughly 6,000 megawatts of new natural gas power in Pennsylvania
- Convert approximately 500,000 homes heating with fuel oil to natural gas
- Install roughly 2,200 MW of distributed combined heat and power
- Expedite key pipelines (including Transco, Texas Eastern, Columbia Gulf, PennEast/UGI) to increase gas exports by 3.6 trillion cubic feet (Tcf) by 2025, ensuring stable gas production needed for Pennsylvania long-term competitiveness and investor confidence
- Achieve national Top 3 position in “data-hungry” advanced manufacturing, focusing on Pennsylvania’s leadership in robotics, artificial intelligence, and additive manufacturing
- Develop a data center network (six-eight major centers) utilizing low-cost power, preparing for worldwide rollout of the data-hungry Internet of Things Data-driven automated manufacturing
- Build a world-class petrochemical hub with three to five ethane crackers, three to five PDH (propane dehydrogenation, which uses propane as a feedstock for production of propylene) plants, two to three ammonia plants and inorganic chemical plants.
All of the positive forecasts are possible, according to Chevron’s Olson, “IF we realize the full potential of the natural gas under our feet.
“The time to act is now.”