By Amy McLellan
Jim Ratcliffe, the billionaire boss of chemicals giant INEOS, has made no secret of the fact he believes shale gas to be key to rebooting the UK’s ailing manufacturing sector. Last week he put his money where his mouth is, with the global chemicals company announcing plans to invest US$1 billion in onshore shale gas exploration and appraisal, a sum that dwarfs the budgets of the other shale players in the UK, such as AIM-quoted IGas.
Ratcliffe, INEOS chairman, said he wants INEOS to be the biggest player in the UK Shale gas industry. “I believe shale gas could revolutionise UK manufacturing and I know INEOS has the resources to make it happen, the skills to extract the gas safely and the vision to realise that everyone must share in the rewards,” he said.
While Europe has been cautious on shale gas, with some countries imposing moratoriums on fracking, INEOS has pursued its own policy to tap into new lower cost shale gas. It is investing £400 million in an ambitious project to ship competitively-priced ethane from US shale gas plays to its gas crackers in Europe, including its Grangemouth petrochemicals plant in Stirlingshire.
The plant currently runs at a loss but INEOS believes abundant shale gas would transform the economics: this has certainly been the case in the US, where a glut of shale gas has kickstarted the nation’s petrochemicals and energy-intensive heavy industries.
The Swiss-based company already holds two shale licences that stretch for more than 120,000 acres in Scotland. It bought BG Group’s 51 per cent stake in the shale layer of PEDL 133, which covers 329 square kilometres surrounding Grangemouth and reached a deal with Reach Coal Seam Gas to acquire an 80 per cent stake in the adjacent PEDL 162.
But it has ambitions to significantly expand its shale gas footprint: according to the company, if it wins all the shale gas licenses it has applied for, INEOS will be the biggest player in the UK shale gas industry. Most of the applications are for acreage in Scotland and the North of England.
Gary Haywood, CEO INEOS Upstream, said: “Whilst the awarding of the licences is a matter for DECC, we believe our knowledge and experience in running complex petrochemical facilities, coupled with the world class sub surface expertise we have recently added to our team, means that INEOS will be seen as a very safe pair of hands”.
The company is keen to secure community support, with a guarantee to give local communities six per cent of any revenues generated: four per cent to home and landowners above the well and two per cent to the wider local community. This could be worth £375 million to a community. Environmental campaign group Friends of the Earth Scotland has criticised the move as “a transparent attempt to bribe communities”.
Peter Kiernan, Energy Analyst at The Economist Intelligence Unit, said INEOS is making a long-term bet on being able to access lower priced domestic shale gas to improve competitiveness.. “More broadly the momentum for developing shale gas in Europe has so far been very slow, with incremental advances most recognizable in the UK and Poland,” notes Kiernan. “It may take a few years before there is production at a commercial scale, but any growth in European gas supply can mainly be expected from tapping unconventional sources.”
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Ineos at Grangemouth
