On Tuesday, in a deal worth 30 million pounds, the Swiss chemical giant Ineos bought a 50 per cent stake in IGas’ licences in the North West and East Midlands of England and in Scotland. The company would also agree to fund up to 138 million pounds in drilling and other exploration work in the license areas.
The deal with IGas will see Ineos gaining about 220,000 exploration acres with 67 trillion cubic feet of gas in place, although it is not clear yet how much of it could be commercially produced.
Ineos bet hard on British shale with an investment 640 million pounds announced in November and a promise of a payment of 6 per cent of its shale gas revenues to UK homeowners affected by the shale exploration. The Swiss giant is one of very few businesses that can use shale gas as both a fuel and a feedstock in its manufacturing plants. It is already spending hundreds of millions of pounds to import large quantities of shale gas from the USA to its Grangemouth facility in Scotland, a necessity as the availability of gas in the North Sea has declined.
Commenting on the purchase, Gary Haywood, CEO of Ineos Upstream, said: “This is a great opportunity to acquire some first class assets that have the potential to yield significant quantities of gas in the future. Ineos believes that an indigenous shale gas industry will transform UK manufacturing, and that we can extract the gas safely and responsibly.”
“Ineos’ scale, asset position across the UK, U.S. shale gas expertise, and our expertise in managing oil and gas facilities will be a great match with IGas’ existing onshore asset base, and significant exploration and production capability.”
The deal was good news for IGas, which was affected by the falling oil prices, resulting in the company’s shares rising almost 20 per cent in midday trading in London, although they remain nearly 80 per cent below their level in June, when there was greater optimism about the prospects of the British shale industry.
“Alongside the commitment from our existing partners, Ineos’ commitment of upfront cash and considerable capital investment will help fund us through the next steps of our shale appraisal and production programme,” said Andrew Austin, CEO of IGas, in a statement.
IGas also has an existing exploration partnership with Total, the French energy giant, and with GDF Suez.
The agreement is likely to give a much-needed boost to the UK shale prospects, adversely affected by the pre-election rhetoric, with MPs shying away from the controversial topic. It is certainly good news for the local economy since Ineos already employs around 250 people on Teesside. Speaking to a local newspaper, an Ineos spokesperson said: “Long term benefits of shale gas mean it can reduce prices and make all the Ineos plants more competitive.
“The sites in question are mainly in Scotland, the East Midlands and Runcorn.
“All Ineos plants are connected.
“Teesside will benefit, it’s good news; the bigger Ineos becomes in shale, the better for its other sites.”
Ineos’ acquisitions mean that the company will hold full ownership of the shale licence around the Grangemouth petrochemical plant, however the recently imposed moratorium on shale exploration in Scotland means that it is difficult to predict when any exploratory work is likely to commence.
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