Chemicals giant Ineos, the owner of the Grangemouth faciity, has announced plans to invest £640 million in shale gas exploration. The move could make it the biggest shale company in the UK.
“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,” Ineos’ chairman Jim Ratcliffe said.
Ineos has announced it will give local communities 6 per cent of the revenues from any shale gas it produces, worth an estimated £375 million – an offer described by Mr Ratcliffe as ‘generous’. He admitted that the payments could make some people millionaires, adding: “That’s fine.”
Gary Haywood, chief executive of Ineos Upstream said: “We believe our knowledge and experience in running complex petrochemical facilities, coupled with the world class sub surface we have recently added to our team, means that Ineos will be seen as a very safe pair of hands.”
To transform the fortunes of the loss-making Grangemouth plant, Ineos has secured a £230 loan guarantee from the UK Government to build a new terminal to import, store, and process ethane from shale gas at the site. The company has secured contracts with Evergas, Sunoco Logistics, and Enterprise Products Partners for the supply of cheap shale ethane from the U.S.
At the time, Ineos chairman Jim Ratcliffe commented: “Without doubt, this is one of the most important projects of recent times in Scotland, with implications to be felt right across the UK, not only for employment but also for manufacturing in general.
“Our ability to import US shale gas underpins the future of manufacturing at Grangemouth and across many businesses in Scotland. It is a vital step towards preserving the long term future of the Grangemouth site and those businesses that depend upon its continued presence in Scotland.”
Apart from purchasing cheep gas from the U.S., Ineos Upstream has also invested in shale exploration within the UK. In October this year Ineos Upstream bought an 80 per cent interest in Petroleum Exploration and Development Licence (PEDL) 162, in the Midland Valley of Scotland, from Reach Coal Seam Gas Limited. As part of the deal, Ineos agreed to be the operator of the licence, and to fund the initial appraisal activity (consisting of 2 vertical science wells and 100 km2 of 3D seismic).
To unlock the potential of the recently acquired Scottish shale reserves, Ineos hired the world leading specialists from Mitchell Energy, the company credited with perfecting shale gas extraction in the USA.
“The former Mitchell Energy team were among the pioneers of the shale gas revolution in the US, and they bring a vast experience of successful shale gas production from various areas of the US. We are confident that our US team, together with our own experts, can safely and efficiently develop a successful business in Scotland, which will play a part in securing the energy supply of Scotland and the UK, and will bring significant economic benefits to the country and to the community,” Gary Haywood said at the time.
Energy Minister Matt Hancock welcomed the investment, saying: “It is good news that Ineos want to invest in extracting UK shale gas. Ineos is a major company with serious intent and the confidence to make the most of this domestic energy supply.
“Extracting domestic shale gas has the potential to create jobs, make us less reliant on imports from abroad and help us tackle climate change, all within one of the most robust regulatory regimes in the world.”
Environmentalists, who oppose shale exploration on the grounds that it may cause pollution of the groundwater and earthquakes, as well as because it diverts funds from renewables, accused Ineos of jumping on a “spin-powered bandwagon”.
Simon Clydesdale, energy campaigner at Greenpeace UK, said: “Investment is essential to transform our energy system, but not giant speculative bets on unproven and risky resources. Ineos have jumped on a spin-powered bandwagon which is going nowhere.
“Independent academics recently called out Government ministers over the ludicrous levels of hype around shale gas, saying ’shale gas has been completely oversold’. It seems that Ineos have based their business plan on breathless PR brochures rather than scientific reports.”
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