Bob Spehar has sold gasoline on Spring Garden Avenue in Pittsburgh for 20 years, the last eight under the Shell brand.
Some customers don’t understand that, as owner of Marshall’s Shell station, he’s an independent businessman.
“They look at you like you’re some big corporate,” Spehar said. “But we’re local individuals just trying to make a living like everyone else.”
Most Western Pennsylvanians are familiar with the logo outside Spehar’s gas station and convenience store — the iconic, century-old seashell that identifies more than two dozen of Shell’s franchised stores in the region and more than 14,000 franchises along streets and highways across America.
But with Shell Oil Co.’s announcement on Thursday that it chose a site in Beaver County where it could build a multibillion-dollar petrochemical plant, the average person in coming years could see much more of one of the world’s biggest and farthest-reaching companies.
The plant outside Monaca could cost up to $4 billion to build and could employ hundreds. Its presence could create thousands more jobs at suppliers and ancillary businesses throughout the region.
Houston-based Shell Oil is the U.S. subsidiary of Royal Dutch Shell plc, a nearly $500 billion-a-year enterprise based in The Hague, Netherlands. Ranked No. 5 last year on Forbes magazine’s Global 2000 list, it operates on every continent except Antarctica, employs 93,000 people and sells its brand from 43,000 petroleum stations.
“It’s a formidable company,” said Fadel Gheit, an analyst with Oppenheimer & Co. Inc. “It does business in 100 different countries and has one of the strongest brands in the world.”
Royal Dutch Shell traces its roots to Marcus Samuel, a London merchant who in the 1880s started an import/export business to bring seashells and other goods from Asia to England, the company’s website states. Samuel’s Shell Transport and Trading Co. in 1897 began shipping oil and partnered with Royal Dutch Petroleum Co., which produced oil in the Dutch colony of the East Indies.
The two companies created Royal Dutch/Shell in 1907 and expanded. It remained a joint venture until 2005, when it merged into one publicly traded company.
Royal Dutch Shell has developed oil and gas reserves in recent years to catch up with competitors, said Brian Youngberg, an analyst with Edward Jones & Co.
“They’ve been more mega-project focused than most of the other companies,” Youngberg said. “Shell puts more of their eggs all in one basket.”
Its investments could boost the company’s cash flow by 50 percent over the next several years, Gheit said.
Its U.S. operations, which produce about a quarter of Royal Dutch Shell’s profits, primarily have focused on oil exploration in Alaska, Canada and the Gulf of Mexico. It owns oil refineries, chemical plants, pipelines and eight wind operations. On the retail side, in addition to gasoline stations, it owns Jiffy Lube oil change shops and Quaker State and Pennzoil motor oils.
All that gives Shell more than 20,000 American employees.
Good corporate citizen
About three years ago, Shell made a “huge strategic bet” on natural gas, which it hopes will define the company’s fortunes going forward, Gheit said.
“They believe natural gas is the fuel of the future,” he said.
Shell operates four cracker plants in the United States — two each in Nocor, La., and Deer Park, Texas, said Philip Weiss, an analyst with Argus Research Corp.
“Like many other integrated oil companies, Shell has operated a chemicals business for many years,” Weiss said.
Those plants are similar to what Shell could build here, except they create petrochemicals from oil rather than natural gas. Its only natural gas cracker is in China, the company has said. It has more than two dozen chemical and other plants around the globe.
In Deer Park, Texas, Mayor Wayne Riddle said Shell is a good corporate citizen.
“Deer Park is here because of Shell,” Riddle said, noting the small town grew up around Shell more than 80 years ago. “They stay involved with our community.”
Shell was the first chemical producer in the city of about 32,000 near Houston. More than 25 chemical companies operate there now, and Shell and Dow Chemical Co. are expanding, Riddle said.
Recent player in region
Shell only recently emerged as a player in Western Pennsylvania’s Marcellus shale gas industry.
The company’s $4.7 billion acquisition of Marshall-based East Resources Inc. in 2010 gave it access to 700,000 acres of mineral rights in the shale formation stretching from southern New York through Western Pennsylvania and into Ohio and West Virginia. It has access to natural gas in Canada, Wyoming, Texas and Louisiana.
Shell’s Appalachia division, headquartered in Marshall Township, employs 185 people and concentrates on drilling in Tioga County.
Exxon Mobil Corp. and Chevron Corp. are other world-class oil and natural gas companies that have joined Shell in tapping energy reserves in this region. But plentiful drilling has caused natural gas prices to decline in America.
That’s where the “cracker” comes in, said Kent Moors, a Duquesne University professor and energy industry expert. The plant will extract ethane from natural gas and convert it into the raw material for making plastic products, earning Shell additional profit on its gas, Moors said.
“If you’re a major vertically integrated company like Shell, then you really want to control the whole operation,” he said.
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