Providers of materials, capital goods, construction and well
services, professional and other services and logistics represent a
sizable portion of the economic activity generated by the
unconventional oil and gas boom
A sizable and growing portion of the economic benefits from
unconventional oil and gas development in the United States is
being felt by a diverse group of industries that support oil and
gas producers, according to a new study by IHS (NYSE: IHS), the
leading global source of information and analytics.
Employment related to unconventional oil and gas production in
these supply chain industries totaled 524,000 jobs in 2012 and is
expected to grow 45 percent to 757,000 jobs in 2025, equal to 41
percent of total direct and indirect employment supported by
unconventional oil and gas value chain activity.
The study, Supplying the Unconventional Revolution: Sizing the
Unconventional Oil and Gas Supply Chain, is a comprehensive
assessment of the unconventional energy supply chain. It continues
IHS research on the economic contributions of unconventional oil
and gas activity that has increased U.S. oil production by 50
percent since 2008 and has played a major role in making the
country the world’s leading natural gas producer. Previous IHS
studies in this area examined the total economic contributions for
all sectors involved in the unconventional oil and gas
activity—including direct, indirect and induced jobs—in upstream,
midstream, downstream energy and energy-related chemicals. This
latest study focuses solely on direct and indirect contributions
related to the specific supply chain industry portion of that
economic activity. The study measures across 56 North American
Industry Classification System (NAICS) sectors the economic
activity specific to those industries that directly and indirectly
support unconventional oil and gas activities in the upstream,
midstream and downstream segments of the energy value chain.
Examples of supply chain industries include manufacturers of
steel pipe, construction equipment, railcars, sand and gravel
producers, and professional and technical labor.
In addition to jobs supported, the study finds that supply chain
industries will contribute more than $16 billion in government
revenues in 2015 (up from $13 billion in 2012) and rise to about
$23 billion in 2025.
Total gross output from this group of industries is expected to
grow from $145.7 billion in 2012 to $205.9 billion in 2025,
contributing the equivalent of nearly one half a percent total U.S.
gross output each year.
Total labor income generated by employment in these industries
is expected to reach nearly $60 billion in 2025, up from $41
billion in 2012. The average income per employee is estimated to be
about $79,000 over the course of the study, exceeding the average
annual U.S. wage of $68,000.
“It is an important part of the story that the unconventional
oil and gas producers sit atop long and diverse supply chains that
run through the U.S. economy,” said Brendan O’Neil, managing
director, consulting, IHS Economics and Country Risk. “The growth
in unconventional production has become an important source of
economic activity for these industries at a time when many of their
other primary markets were experiencing decline as a result of the
Great Recession.”
The IHS study finds that these supply chain benefits are being
felt by industries located in states with and without
unconventional oil and gas production. Though unconventional
oil-and gas-producing states predictably experience a larger
portion of supply chain economic activity, a sizable portion also
occurs in non-producing states in industries such as steel-making,
machine tool manufacturing and sand and gravel production. The
study notes that many of the supply chain sectors analyzed maintain
lengthy supply chains of their own, which adds further to the
economic impact.
Jobs supported by supply chain activity in producing states were
nearly 460,000 in 2012 and are expected to increase to 630,000 jobs
in 2025, with construction and support activities for oil and gas
operations being the highest source of employment contributions.
Total employment contributions for non-producing states are
expected to rise from 64,000 jobs in 2012 to 127,000 in 2025, with
the capital goods sector contributing the most jobs for those
states.
The study also examines the impact of unconventional production
on supplemental construction—infrastructure, housing, commercial
and industrial building activity—that occurs in addition to direct
spending by oil and gas operators.
Supplemental construction spending amounts to nearly $4 billion
in 2014 and supports more than 15,000 workers. The cumulative
impact of supplemental construction spending is expected to total
more than $49 billion through 2025, supporting an annual average of
12,300 jobs during that period. Supplemental construction for
housing will have the largest impact, representing nearly $3
billion in 2014 spending and is expected to peak at more than $5
billion in 2021.
“The supplemental construction spending driven by unconventional
oil and gas activity has had a major impact on the construction
industry—particularly residential construction—which was so hard
hit by the Great Recession,” O’Neil said. “In many ways the
unconventional oil and gas boom could not have come at a better
time for the construction industry.”
About The ReportSupplying the Unconventional Revolution:
Sizing the Unconventional Oil & Gas Supply Chain is the latest
iteration of IHS research on the “Unconventional Revolution” and
sizes the supply chain that supports upstream, midstream and
downstream activity across the lower 48 US states and 56 discrete
supplier sectors. Building on the original IHS research in the
America’s New Energy Future series, the latest study defines the
different supply chain sectors in terms of economic contributions
to employment, gross output, labor income and tax revenues
resulting from unconventional oil and gas production and
investment. The most recent study also examines the impact of
unconventional oil and gas development on new construction of
infrastructure, industrial, commercial and residential
buildings. This research was supported by the Energy Equipment
and Infrastructure Alliance, which represents members that provide
equipment, materials, construction, services, logistics and workers
to unconventional oil and gas exploration, production,
transportation and processing. IHS is exclusively responsible for
all of the analysis and content.
Download the complete report and methodology: Supplying
the Unconventional Revolution: Sizing the Unconventional Oil and
Gas Supply Chain is available at
www.ihs.com/shalesupplychain.
About IHS
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