Phases of Development
Understanding the Phases of Development
There are three phases of development related to the shale industry: upstream (drilling), midstream (pipeline) and downstream (utilization).
The first phase of development in the oil and gas industry revolves around the upstream sector. This phase includes everything from land acquisition to the drilling and completion of the wells. The midstream sector deals with moving the gas to market while the downstream sector revolves around the utilization of oil, gas, and natural gas liquids. The current state of development is an exciting time as the Marcellus is seeing development in all three sectors of the industry. Increased focus on the Utica Shale and other shales, provides more opportunities in the upstream sector as well.
While there are and will continue to be opportunities in the upstream and midstream sector for decades, the downstream sector will provide the longest lasting impact to the Appalachian Basin. However, it is important to understand that development in the upstream and downstream sector must continue in order to realize the projected long-term benefits from the downstream sector.
The American Chemistry Council has been tracking reported downstream projects related to shale gas. A reported $202 billion in new or expansion projects has been announced to date across the nation. In the Appalachian Basin, $36 billion in project investment has been announced in petrochemicals, resins, plastics, and derivatives. These projects include the construction of multiple ethane cracker facilities in the region to support the plastics and resins industries. These projects are all dependent on the upstream and midstream development continuing at a steady pace. Each of these projects is susceptible to being impacted by policy decisions, environmental concerns, and public scrutiny.
The Shale Revolution has transformed the economic landscape of the Appalachian Basin. Hydraulic fracturing and horizontal drilling have helped unlock sources of oil, gas, and natural gas liquids that were not considered commercially viable. Over the past decade, nearly $100 billion has been invested in the region to develop shale resources. This has provided numerous opportunities for businesses to launch and expand their operations.
There are three phases of shale development and each phase provides unique opportunities for manufacturers:
The upstream phase focuses on land acquisition, well drilling, and completion.
Midstream refers to developing the infrastructure in moving the product from the well pads to market. This includes installing pipeline(s), as well as the compressor stations and related infrastructure.
Downstream development provides a long-term, lasting impact that is most visible in communities. This development has grown over the past several years and includes natgas power plants, transportation, and the use of natural gas as a chemical feedstock in the manufacturing of plastics.
As we enter the second decade of exploration and development, the Marcellus Shale is still the driving force behind shale development in the Appalachian Basin. However, as the Utica Shale and other shales are being explored and developed, this has expanded the longevity of the shale plays. As operators have ramped up development over the past 18 months, the need for products and services is also increasing. Technology and innovation are the driving force of the oil and gas industry and the manufacturing sector has been providing solutions and improvements to help advance the shale industry since its inception.
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