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How the Marcellus Shale impacts Lehigh Valley businesses

By LVEDC Staff on May 7, 2013

The Marcellus Shale discovery and its subsequent drilling is impacting businesses in the primary drilling areas of North Central and Northeastern Pennsylvania and Southwestern Pennsylvania. That noted it also impacts businesses outside of the drilling areas. And any company interested in the opportunities the drilling affords must understand where they fit in the supply chain.

Penn State’s Marcellus Center for Outreach and Research categorizes companies into three categories – pre-drilling, drilling and well production and completion supply chain. The pre-drilling phase is the leasing of land, obtaining all the environmental and government permits and then, developing the well pad from which the drilling will occur. For a company to be involved in the pre-drilling phase, it must have a presence in the drilling area. The business opportunities in the pre-drilling phase are land leasing companies, legal (lawyers, abstractors and paralegals), civil engineering, heavy construction, logging and land clearing, surveying, truck service and repair and satellite oil field service.

All of these companies are directly involved in the well-site construction, but other companies are needed to support them. Hospitality services (restaurants, hotels, catering services, etc.), supply companies (flame resistant clothing, tools, hoses, rental equipment, etc.) and staffing firms would be in this category. Staffing firms may have the best opportunity because the demand for workers continues to increase. Most of the drilling is occurring in counties that are populated sparsely without sufficient supply to meet demand. Staffing firms that can find workers for the well sites and trade skills such as welders, truck drivers, and mechanics will find success in the Marcellus Shale region.

The second phase of the development of the well site is drilling and well completion, which is the actual drilling of the well. The industries needed for this phase are owners of camp grounds, recreational vehicle sales and leasing, land to lay-down and pipe yards, safety equipment of all types, cement operations, freight companies and equipment rentals. Probably best opportunities for Lehigh Valley companies are to provide supplies to the drilling operations like tubular steel products, drilling fluids/fluids management, heavy hauling, drilling supplies (bits, hoses, hydraulic fluid and hoses, etc.), machine/fabrication shops, environmental, and engineering firms.

The third phase – the completion supply chain – utilizes many of the same business types as the previous two phases.  Drilling and completing the well is only the first part of the energy equation. The second part is moving the gas. The production supply chain is the building of the pipeline and compression stations to move the gas to markets commonly called the Mid-Stream. It is in the production supply chain that the gas companies are looking for construction/fabrication companies that can build compressor stations, processing facilities and transfer stations. Additional companies are machine shops, earth moving, commercial trucking, railroad service and safety equipment. The supplies needed for the production supply chain are pipeline, steel pipe manufacturing, specialized pipe welding, compressors and steel buildings.

While the industry is new to Pennsylvania, the services, products and expertise needed by the oil and gas industry are not. The commonwealth offers a cache of the talent and skills required to get the job done and many are available right here in the Lehigh Valley. The quickest path to success in this industry, like so many others, is to network. Attend events to meet other attorneys, bankers, mechanics, restaurants, engineers, consultants, certified public accountants. But again consider the big picture and what is the best return on your time and investment?

Edward R. Kundahl, Ph.D., M.B.A. is a LVEDC investor and president of IdeaOverTen, LLC,  an innovative search engine optimization and internet marketing firm located in Allentown. For additional information on business opportunities in Marcellus Shale please visit www.shaledirectories.com

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