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TCI 2013 Smart Specialization: How New Technologies Drive New Opportunities for Cluster Development
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TCI 2013 Smart Specialization: How New Technologies Drive New Opportunities for Cluster Development


By Elizabeth Redman, IHS Global Inc., USA, presented at the 16th TCI Global Conference, Kolding 2013.

By Elizabeth Redman, IHS Global Inc., USA, presented at the 16th TCI Global Conference, Kolding 2013.

Published in Business , Economy & Finance
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  • Since we are talking about technology, let’s start with the basics. Oil & gas resources are often found in small, porous zones in various rock formations thousands of feet below the earth’s surface. Oil & gas companies have always used technology to identify where the resources are and to extract them safely.
  • While the oil and gas industry has been exploring/ drilling for conventional oil & gas for more than 150 years, what’s become newly addressed by the media worldwide is hydraulic fracturing, a process that uses a pressurized mixture of sand & water to force open fissures in subterranean rock and recover oil & gas. This first began in 1947 and since then, more than 1 million wells have employed this technology.
  • Thus, hydraulic fracturing, or “fracking” isn’t a new technology. Rather, technological breakthroughs in horizontal drilling (as opposed to vertical) and fracturing with new liquid compounds have made shale and other hard-to-access oil & gas supplies commercially viable.
  • Thus it’s the primarily horizontal drilling technologies that have allowed the scale of the oil & gas industry to increase dramatically in the US and create new industry dev’t opportunities across the US.
  • Shale gas production via advanced hydraulic fracturing has more than doubled the size of thediscovered natural gas resource in North America, from 50 billion cubic feet (Bcf) per day less than 10 years ago to around 70 Bcf per day today, a 40% increase,enough gas to satisfy more than 100 years of consumption at current rates
  • This has shifted the economic realities and economic competitiveness strategies of US states in a number of ways since shale gas plays are all over the country, with some of the most active in Texas, Ohio, Pennsylvania, Arkansas, North Dakota, & Colorado.
  • Unconventional fuel technologieshave already had and will continue to have an economic impact on both producing and non producing states. These benefits extend beyond direct employment in the O&G industry.
  • First, the new technologies are transforming the US trade balance. Five years ago the US was on track to spend $100B annually on LNG imports. today there are discussions about the US becoming a LNG exporter.
  • Second, unconventional fuels are driving new investment. Nearly $5.1 trillion in cumulative capital investments expected to be made in the US between 2012 and 2035.The Haynesville Shale play has sparked more than $10 billion in new business sales within LA.Williams Companies: Planning to expand Geismar, Louisiana, olefins production facility to increase ethylene production capacity. It is expected 2013 Q3 at a capital cost of $350- $400 million.Dow Chemical Company: Announced numerous U.S. Gulf Coast investments, including reconfiguring existing ethylene production units as well as restarts, the construction of a new world-scale ethylene cracker, and the addition of on-purpose propylene production capacity.Chevron Phillips: May build an ethane cracker at one of its US Gulf Cost facilities because of the availability of low-cost raw materials from shale gas formations. The plan expects a start-up in early 2017.Royal Dutch Shell: Planning to build a world-scale ethylene cracker with an integrated derivative unit in the Appalachian region to process ethane from Marcellus natural gas to produce ethylene. Sasol:Currently undertaking a feasibility study for the first commercial scale North American “gas-to-liquids” (GTL) technology to be built in a plant in Louisiana
  • In addition to new investment, the ability to access unconventional fuels is creating opportunities for new industries, both traditional and new. These include existing oil & gas producers, directly involved supply chain industries like construction, machinery manufacturing, shipping and trucking, and downstream manufacturers (e.g. petrochemicals or plastics) who rely on oil & gas feedstocks.
  • Louisiana provides one example of all of the benefits previously mentioned.in just the last 2 years, projects representing tens of billions of dollars in new capital investment have been announced there, including a $6 billion natural gas liquefaction export facility (Sempra Energy), a $500 million methanol plant relocated to the area from Chile (project by Methanex Corp.), a $150 Million Petrochemical Storage and Processing Facility (owned by KatoenNatie USA), R&D headquarters for global energy companies (South African energy giant Sasol Ltd.), and a gas-to-liquids, or GTL, complex.Louisiana has been working to position itself as the destination of choice for major, downstream projects that will utilize natural gas as a fuel and a feedstock. A unique set of assets gives Louisiana a competitive edge, including superior oil and gas infrastructure, established and emerging shale deposits, a thriving chemical sector demanding liquid feedstocks, and an intermodal transportation network that can reach national and global markets.  The petrochemical growth is caused by the ample supply of cheap natural gas south Louisiana chemical plants can tap into. That has lowered the cost of one of the industry’s primary feedstocks and fuel sources.a $466 million Westlake Chemicals chlor-alkali plantthe world’s first commercial ethylene tetramerization unit
  • But what’s more interesting is that the unconventional fuels boom is also creating opportunities for industries in non producing states. These include opportunities for advanced technology suppliers like geospatial mapping tools, emissions control technology, and tools for monitoring & sensing everything from water contaminants to seismic activity.
  • Finally, smart specialization led by new oil & gas industry technologies is leading to new innovations and entrepreneurial businesses, such as those started by Forbes Guthrie in CO. This VP of Stewart Environmental Consultants has recently patented a Ceramic durable membrane for water treatment, and is starting 2 other new businesses: 1) a brackish water transport business for arid areas, and 2) a company that will separate valuable commodities, perhaps extracted during the mining or fracking processes, from water.
  • In CO, the increased production of the oil & gas industry and environmental awareness surrounding it has fueled new opportunities for many companies incubated by the Rocky Mountain Innosphere. Acting as a convener, adviser, and early stage investor, this Fort Collins institution is incubating many technology-based businesses with a connection to the O&G industry, including water technologies, digital mapping, and remote geography access.
  • One example is the CO water innovation cluster, whose companies address both the challenges of water usage (quantity) and water contamination (quality.) Defying the old saying, "Whiskey's for drinking, and water's for fighting“, academia, government and private industry have come together to think through new ways to address the region’s water issues while simultaneously supporting local water technology businesses.http://www.co-waterinnovation.com/Current MembersAcademia•  Colorado State UniversityGovernment•  City of Fort Collins•  Fort Collins Utilities•  Larimer CountyPrivate Industry•  Aqua Engineering•  Bendelow Law Office, LLC•  In-Situ Inc.•  Lamp, Rynearson & Associates, Inc.•  Regenesis Management Group•  Riverside Technology, Inc.•  Rubicon•  Stewart Environmental Consultants•  Tom CechExample companies:SymbiosTechnologiesSymbios Technologies develops and commercializes state‐of‐the‐art clean technologies to improve watertreatment, waste disposal, and biofuel production economics. Symbios has developed a scientifically advancedlow‐cost aqueous plasma oxidation technology, the Symbios Plasma Reactor, to clean water, preserve theenvironment, and protect human health as well as improve energy production economics and sustainabilityOptiEnz SensorsOptiEnz has revolutionized measurement capabilities for organic chemical concentration; now providingcontinuous, real‐time, in‐place sensor solutions.Avivid Technologies Group, LLCAvivid is a holding company dedicated to the management and financing of wholly owned companies and joint ventures in the environmental and energy service industries. Avivid currently owns Avivid Water Technology, LLC (water purification) and Avivid Pipe Products, LLC (waste water pipe maintenance). Avivid has an owner and operator business model, meaning their company not only provides the tools, but also operates the tools as part of their product.
  • All of this leads to new job creation. In fact, IHS’s recent study shows that the employment contribution of the unconventional oil and gas industry will double from 1.7 million in 2012 to 3.5 million in 2035 with direct industry jobs paying an average of $35.15/hour vs economy wide average of $23.70/hour.On average direct employment will represent about 20% of all job resulting from unconventional oil and gas activity with the balance contributed by indirect and induced employment. Upstream unconventional oil and natural gas activity, on average, demonstrates one of the larger employment multipliers placing it ahead of such notable industries as finance, construction, and many of the manufacturing sectors.
  • In a conference about regional competitiveness, it would be foolish not to point out that the IHS study also shows that the annual contribution of unconventional oil and gas activity to US GDP is projected to reach $475 billion by 2035. This is in addition to reversing a 30 year decline in US oil production, decreasing the US trade deficit, and cutting CO2 emissions as natural gas replaces coal fired power plants.
  • I hope this presentation will make you ask, “What opportunities does new technology enable for my region?”
  • For more information or technical details, I’m including the link to the IHS reports in the slides that will be available. I look forward to questions and the discussion to follow. Thank you.


  • 1. Smart Specialization: How New Technologies Drive New Opportunities for Cluster Development Elizabeth Redman Breakout Session: Clusters and smart specialisation strategies: design and implementation 5 September 2013
  • 2. Presented by: Elizabeth Redman Senior Consultant IHS Economics & Country Risk Smart Specialization: How New Technologies Drive New Opportunities for Cluster Development An Example from the US Unconventionals Industry
  • 3. Copyright © 2011 IHS Inc. All Rights Reserved. Geology of Unconventional Gas
  • 4. Copyright © 2011 IHS Inc. All Rights Reserved. Source: Matthew Ganser, Carbon Lighthouse, August 2013 1,000,000 + Wells Hydraulically Fractured
  • 5. Copyright © 2011 IHS Inc. All Rights Reserved. Source: Matthew Ganser, Carbon Lighthouse, August 2013 Technology Has Changed Direction
  • 6. Copyright © 2011 IHS Inc. All Rights Reserved. Horizontal Fracturing is On the Rise Source: Matthew Ganser, Carbon Lighthouse, August 2013
  • 7. Copyright © 2011 IHS Inc. All Rights Reserved. US (Lower 48) Natural Gas Production by Type: 2000-2011
  • 8. Copyright © 2011 IHS Inc. All Rights Reserved.
  • 9. Copyright © 2011 IHS Inc. All Rights Reserved. Impact of Unconventional Fuels on the United States 9 Producing States Non-Producing States Top 10 Other Top 10 Other Extensive supply chain will spread economic impacts beyond producing states…
  • 10. Copyright © 2011 IHS Inc. All Rights Reserved. 1) Transforming import/ export dynamics 10 NOTE: Net natural gas imports equals total natural gas imports minus total natural gas exports. Source: EIA
  • 11. Copyright © 2011 IHS Inc. All Rights Reserved. 11 0 50 100 150 200 250 300 350 400 2012 2015 2020 2025 2030 2035 Unconventional Oil and Gas Capital Expenditures (billions of 2012 dollars) Unconventional Gas Unconventional Oil 2) Driving New Investment
  • 12. Copyright © 2011 IHS Inc. All Rights Reserved. 3) Creating New Industries in Producing States Source: Kansas Geological Survey, Public Information Circular (PIC) 32
  • 13. Copyright © 2011 IHS Inc. All Rights Reserved. "Come fall in Love with Louisiana all over again." 13 Image courtesy of Sasol
  • 14. Copyright © 2011 IHS Inc. All Rights Reserved. 14 Oil & Gas Extraction 210,758 Professional, S cientific, and Technical Services 102,294 Food Services & Drinking Places 157,807 Machinery Manufacturing 115,730 Real Estate 107,660 Wholesalers 102,294 Others 2,188,625 4) Creating New Industries in Non-Producing States Employment Contribution in 2020, US
  • 15. Copyright © 2011 IHS Inc. All Rights Reserved. 5) New Innovations & Start-Ups 15 new company which brings brackish water to fracking companies working in arid areas where water is expensive “manufacturing water”: Treat produced water to reuse standards using a ceramic durable membrane during the microfiltration phase of wastewater treatment. Using geospatial tools to cite projects “mining water” to separate commodities of value, e.g. Lithium, calcium carbonate, etc., and restore cleaner water to CO.
  • 16. Copyright © 2011 IHS Inc. All Rights Reserved.
  • 17. Copyright © 2011 IHS Inc. All Rights Reserved. © Andy Cross, The Denver Post EcoVapor Recovery
  • 18. Copyright © 2011 IHS Inc. All Rights Reserved. 18 - 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 2012 2015 2020 2025 2030 2035 Employment Contributions of Unconventional Oil and Gas Activity (thousands of workers) Induced Indirect Direct Smart Specialization Working
  • 19. Copyright © 2011 IHS Inc. All Rights Reserved. Additional Long Term Benefits 19 0 50 100 150 200 250 300 350 400 450 500 2012 2015 2020 2025 2030 2035 Value Added Contributions to GDP of Unconventional Oil and Gas Activity (billions of 2012 dollars) Induced Indirect Direct
  • 20. Copyright © 2011 IHS Inc. All Rights Reserved. 20 What opportunities does new technology enable for my region?
  • 21. Copyright © 2011 IHS Inc. All Rights Reserved. Thank you • For more information on past IHS work see: 21 America’s New Energy Future Volumes I & II http://www.ihs.com/info/ecc/a/americas-new-energy-future.aspx http://www.ihs.com/info/ecc/a/americas-new-energy-future-report-vol- 2.aspx?ocid=anefvol2-21350:consulting:dm:0001