Drilling Down

Rosy Ohio Shale Jobs Report Overtaken by Events

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YOUNGSTOWN, Ohio – A recently released state report that quantifies shale-related employment in Ohio shows the state’s oil and gas industry at a high point – 193,755 jobs. Trouble is the state’s numbers stop at the second quarter of 2015 and do not reflect the impact of low prices of oil and natural gas, the resulting cutbacks in supply-chain employment (think Vallourec) or the fact that the Utica’s No. 1 driller, Chesapeake Energy Corp., has pulled out all of its rigs.

Yesterday Chesapeake reported it has “released all operated rigs” in the Utica and Marcellus shale plays. The company announced it lost $14.86 billion in 2015 and plans to cut capital expenditures by 50% this year as it sells more than $1 billion assets.

No indication was given as to when Chesapeake might resume drilling in Ohio even though the Oklahoma City company obtained two permits last week from the Ohio Department of Natural Resources for wells in Jefferson County.

The Ohio Shale Report, published in January by the Ohio Department of Job and Family Services, says employment in shale-related core industries increased by 6,600 jobs or 96% from the second quarter of 2011 through the second quarter of 2015. “Over the same period, employment in ancillary industries increased by 13,369 jobs, or 8%, “ according to the report.

Moreover, also during the same period, “The number of business establishments in the core industries grew by 246, or 41.6%, while establishments in ancillary industries increased by 97, or 0.8%.”

Core industries include oil and gas extraction, drilling, support activities, pipeline construction and natural gas transportation. Ancillary industries include electric power generation, water supply, and pipe and tube manufacturing.

Because of the time frame in the state report, it does not capture how fast and far employment has collapsed – an estimated 250,000 workers worldwide – with the collapse in oil prices. The price of a barrel of oil closed Wednesday at $32.15 a barrel compared to $115 a barrel in June 2014. And according to published reports, crude stockpiles reached an all-time high last week of 507 million barrels.

In addition to Vallourec’s pipe mill here curtailing pipe production, layoffs are planned at TMK IPSCO’s pipe threading plant in Brookfield. Exterran Energy Solutions, which fabricates compressor stations used at drill sites, announced in December that its plant in the Salt Springs Road Industrial Park will close by March 31. Parker Hannifin’s gear pump plant on Intertech Drive closed this month.

Other manufacturers to close or sharply reduce operations include Warren Steel Holdings, which said Jan. 11 its Warren plant would shut down for good, eliminating 150 jobs, and U.S. Steel, which has cut back operations at plants across the country and recently reported it lost $999 million in the fourth quarter.

Published by The Business Journal, Youngstown, Ohio.