Wednesday, February 29, 2012YOUNGSTOWN, Ohio – The Exterran Energy Solutions manufacturing facility to be built on Salt Springs Road will trigger additional supply-chain activity for the oil and gas industry in the region, company and development officials agreed at Tuesday’s groundbreaking event.
“The fact that Exterran is coming to this region is a giant poster for the whole industry. It’s a sign that this is the right place and this Utica play is serious,” asserted Tom Waltermire, president of Team Northeast Ohio. “This is going to have lots of ripple effects as people say, ‘Exterran’s here – I want to be here to supply them and I want to be in on this play, too.’ So this is just the beginning.”
Exterran buys “all sorts of raw materials” including some rolled materials, “that we think we can get more efficiently by outsourcing, and that depends on the local supply chain,” said Daniel Schlanger, senior vice president, operations services.
“We haven’t gotten very far on what the regional supply chain would look like but there’s obviously benefits to developing a regional supply chain as opposed to importing it from other places,” he said.
Houston-based Exterran will build a 65,000-square-foot, $13.2 million production facility at the Salt Springs Road site where it will manufacture separators, dehydrators and other equipment used to treat and process natural gas and oil.
During a brief ceremony prior to the groundbreaking, Schlanger outlined why Exterran is excited to be in Youngstown.
“The demand for oil and gas is growing and our customers are looking at ways to fill that demand, and we’re trying to get close to our customers in order to help them to do so,” he said. “We are extremely happy that we can be close to our customers and respond as quickly as we can.”
The company based its decision to locate here primarily on the Marcellus activity more than the Utica, he explained. “Should [the Utica shale] come to fruition and be something that people put a lot of money into, and a lot of effort into producing gas and oil,” Exterran sees “significant growth opportunities” here.
The new plant, expected to be up and running by the fourth quarter and producing product during the first quarter of 2013, will employ 103 workers. “We’re hopeful that it can grow from there if everything goes well,” Schlanger said. A similar facility in a Houston suburb that three years ago had just 75 workers today employs more than 300, he noted.
“We hope that something like that can happen up here, too,” he said. One of the factors driving the selection of the Youngstown site was the availability of land for future expansion, he added.
In its news release accompanying the press event, Exterran said it anticipates the hiring process to begin late this summer, with the Mahoning-Columbiana Training Association/One Stop agency serving as the single point for recruiting, screening, referral and placement for new employees. Additionally, Exterran said it would work closely with local technical schools to meet its needs for skilled welders.
The Exterran plant will be dedicated to the fabrication of production equipment used to treat or process natural gas and oil after it is extracted from the ground "such as separation, dehydration, natural gas conditioning, oil treating and conditioning, filtration and air emissions control," the company said. It will use “a streamlined lean manufacturing process, which will shorten lead times, increase manufacturing output and produce high-quality products.”
Schlanger acknowledged his company’s timeline for the Salt Springs Road plant is “aggressive” but he's confident it can meet its fourth-quarter goal for completion of the plant's construction. “We don’t start making money until we start producing product so our goal is to make it as quickly as possible,” he said. Exterran also wants to make sure it can meet demand for its products before its competitors do.
Team NEO, acting on a lead from JobsOhio, became involved last summer in selling Exterran on northeastern Ohio as opposed to other states where it was looking – Pennsylvania and West Virginia. The company “seriously looked” at sites in Tuscarawas and Summit counties, said Team NEO's Waltermire.
“Our role is to guide the company, help the company answer its questions, so it can start narrowing down the choices,” he explained. By late summer/early fall, Exterran officials had settled on the Youngstown area.
“But then we had to get a site, and this is when the whole project becomes a local project,” Waltermire continued. “We can do our job and convince people they ought to be someplace in northeastern Ohio, but if the community doesn’t find the right location and show that it is a welcoming community for new businesses, the company goes to West Virginia. So the deal always gets closed by the local community.” In those terms, the Exterran project “was absolutely classic,” he said.
“This is another sign that eastern Ohio is making a comeback,” said Lt. Gov. Mary Taylor, who represented Gov. John R. Kasich at the groundbreaking. She credited the successful effort to land the project to the “strong partnership” between the company, the state and the local community. “Everybody wins when we work together to bring jobs to Ohio.”
Taylor welcomed the representatives of the Houston-based company to what she jokingly characterized as “a typical day in Youngstown” in February, the sunny skies and mild temperatures contrasting with the often harsh wintry conditions more typical for this time of year.
The president and interim chief investment officer of JobsOhio, Mark Kvamme, drew parallels between the growth the region today around the Marcellus and Utica shale plays to industrial development at the turn of the 20th century around the region’s coal resources, when “this was the manufacturing capital for steel and hard goods” and “great steel companies” and other manufacturers were established here.
Kvamme said he is pleased the state put together a financial package that not only encouraged Exterran to build here, “but most importantly almost 60% of the incentives were for infrastructure,” including road and utility upgrades. The city received a Job Ready Sites grant from Ohio in 2008 to acquire and prepare the 67-acre site, for what at the time was expected to be a new $400 million plant for Exal Corp.
“As we’re talking to the folks here today, we’re seeing a big opportunity across the whole supply chain,” Kvamme said. “What’s really interesting about this project is that it's just the beginning.”
“The opportunity was in front of us” and “everybody stepped to the table,” remarked Tom Humphries, president and CEO of the Youngstown/Warren Regional Chamber, which also worked with Exterran and state and local officials.
Mayor Charles Sammarone similarly praised the cooperative effort, including the work done by the city’s economic development team, and encouraged Exterran officials to tell other firms to locate in the city.
Copyright 2012 The Business Journal, Youngstown, Ohio.