Ineos take a stake in Scottish unconventional gas drilling

As predicted by us and others, Grangemouth plant owner Ineos has taken a major step towards supplying the plant by unconventional gas from Scotland. The company has bought the majority share of a shale gas exploration licence for Scotland, increasing the likelihood of the controversial drilling technique used for extracting oil or natural gas from deep underground coming to Scotland.

There was considerable scepticism at the time of the investment that the plant would really be supplied by imports from the USA in the medium term. Now Ineos Upstream chief executive Gary Haywood has said: “We are one of very few businesses that can use shale gas as both a fuel and a petrochemical feedstock. Ineos is well-placed to become a major player in the UK onshore gas production sector.”

This will also put additional pressure on the Scottish Government to allow unconventional gas drilling in Scotland. Ineos will undoubtably again use the jobs argument to support their controversial business practices.

This will ironically bring them into line with the UK government, who are desperate to bring US style exploitation of shale to the UK. However recent research undertaken by US experts in the field, independent of the big oil and gas companies, have found a very different story. That data shows high early decline rates in existing shale-gas and shale-oil wells, so that high levels of drilling are needed just to maintain production. The Wall Street Journal has also revealed that large foreign investments in US shale-oil and shale-gas leases were drying up rapidly.

Some have taken comfort from the announcement by Scotland’s energy minister that he is opposed to UK plans to remove individual objection rights over drilling in residential areas. However, the headlines didn’t actually reflect what he said. His primary objection was that the consultation was being undertaken by Westminster not Holyrood. He also said:

“We are taking a cautious approach yes, we are taking an evidence based approach. We are looking at matters further and if we decide that it may provide opportunities for Scotland, then perhaps it should be done in a controlled considered way, in appropriate parts of Scotland.”

Not, by some way, a strong line against fracking. Ineos no doubt has a very clear view what ‘appropriate parts of Scotland’ are!

The New Economics Foundation has recently highlighted other arguments against fracking. The most frequent, though disputed, argument made in favour of fracking is that burning gas emits less carbon dioxide than coal, so shale gas provides a lower carbon bridge towards a more renewable electricity system. They point to several papers that have questioned this assumption, reporting high ‘fugitive emissions’ of methane during fracking. It also ignores the fact that the primary use of gas in the UK is not electricity generation, but domestic heating. Decarbonising the energy supply therefore requires action to reduce our reliance on gas, not embark on a new dash for gas.

Hazards magazine has also drawn attention to the health and safety risks to workers. US unions have noted that deaths in the oil and natural gas industry were up by 23% in 2012 alone. It traces the upward trend back to 2008 and the creation of fracking boom towns. In February 2014, a worker died when a Chevron fracking well in a small Pennsylvania town exploded. The fire burned for five days. Of course trade unions raising awkward safety issues have been a target of Ineos as well!

While it’s tempting just to say ‘we told you so’, the Ineos announcement is a significant development and makes the development of unconventional gas in Scotland much more likely.

  • Posted in: Gas

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