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Tuesday, February 16, 2010

Strickland Wins Big Jobs Package: $20 Million In Federal Stimulus Money Opens Door To Natural Gas Bonanza

CINCINNATI (TDB) -- All of a sudden, a large swath of Ohio's hill country is in the middle of an energy drilling boom. European and Asian investors poured more than $2 billion into the region over the past two days. Energy markets were rocked today when Japan's Mitsui & Co. invested $1.4 billion to drill for natural gas, primarily in Pennsylvania's Appalachian region. A day earlier, French steel maker Vallourec SA announced it would invest $650 million to expand an Ohio mill near Youngstown. The French said they plan to manufacture steel tubes to extract natural gas from shale deposits -- the same deposits in the Marcellus basin (the gray portion on the accompanying map) that the Japanese intend to tap. Ohio
Gov. Ted Stricland's economic development team used $20 million in stimulus funds to prepare the Youngstown site for the French investment. The new mill will cover nearly 1 million square feet over an old mining area. Vallourec got another $5 million in state economic development incentives, including tax breaks. At least 350 new manufacturing jobs will be at the mill; they will pay more than $50,000 annually.

The Marcellus basin (everything about it seems to be here at generally follows the path of the Appalachian mountains in a region that includes eastern Ohio, West Virginia, western Pennsylvania and portions of New York. It is one of the largest shale formations in the world. Mineral riches have been locked up because they were beyond the reach of drilling technology until recently. The French company said Youngstown and Ohio are in the middle of the boomlet: "Shale gas production typically requires an increased number of wells, horizontal drilling and sand fracturing at high pressures . . . Ideally located close to major shale basins (e.g. Marcellus) and combined with the Group's other operations in the vicinity of other shale plays (eg. Fayetteville or Haynesville), this new facility will benefit Vallourec's customers in the US."

The Japanese are investing $1.4 to team up with Houston-based Anadarko Petroleum Corp., which believes more than 30 trillion cubic feet of recoverable natural gas lay below Marcellus' acreage it has leased. Overall, there could be 500 trillion cubic feet of gas in the basin. Anadarko Chairman and CEO Jim Hackett said the joint venture with Mitsui & Co. will lead to thousands of new gas wells:

"We continue to ramp up our activities in the Marcellus and anticipate drilling more than 4,500 wells in the coming years. We have successfully teamed up with Mitsui in other parts of the world, and look forward to working with them and our partners in the Marcellus, as we continue to develop and deliver these domestically produced, clean-burning natural gas resources to the American people."

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