If local Marcellus Shale companies want to stay in business, they need to diversify and be very clear about why they exist, according to a report Thursday from The Klaber Group.
Prepared on behalf of the State College-based Ben Franklin Shale Gas Innovation & Commercialization Center, Klaber's report can be seen as both a cautionary tale and a potential lifeline for struggling businesses.
In part, the report describes what most local oil and gas companies already know: Low prices of natural gas, natural gas liquids, and oil have forced upstream companies -- the ones involved in drilling and exploration -- to cut back on spending. This has had a huge impact on local small businesses who focus on drilling services.
But the midstream business -- the market segment that takes gas from the wellhead to the market -- is booming, the report concludes. If companies want to grow, they need to take advantage of the "many growth opportunities for new technology adoption" in the midstream.
The study doesn't exactly tell businesses how to redefine their services, but it does offer fundamental suggestions on how to find a niche outside of the upstream market -- and where to find useful information.
“In the last decade, our region has experienced, first hand, a rapid expansion and a contraction of the natural gas industry," the study's author, Kathryn Klaber, said in a statement. "The supply chain companies that are built on a strong business model, and have diversified their products and services, are poised to benefit from the eventual rebound.” Klaber is the former president of the Marcellus Shale Coalition, and a consultant to the natural gas industry.
Read the full report here.
Matt Stroud is energy reporter for the Pittsburgh Business Times.
Original Source: http://www.bizjournals.com/pittsburgh/news/2015/09/03/new-study-offers-potential-lifeline.html