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£640m bid to be biggest UK fracker

Chemicals giant Ineos has announced plans to invest £640 million in shale gas exploration and appraisal in a move which could make it the biggest player in the industry in the UK.

The company already has two licences near its plant at Grangemouth in Scotland but is applying for more in Scotland and the north of England.

Chairman Jim Ratcliffe said he wanted Ineos to become the biggest company in the British 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."

Hydraulic fracturing, or fracking, involves pumping water, chemicals and sand at high pressure underground to fracture shale rock and release gas.

Environmental groups attacked the announcement.

The two licences Ineos already have comprise over 120,000 acres, while the company is also investing £400 million on a project to bring US shale gas to Grangemouth.

Ineos has announced it will give local communities 6% of the revenues from any shale gas it produces, worth an estimated £375 million.

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."

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.''

Mr Ratcliffe told a news conference in London that the 6% revenue offer to local communities was "generous" and could be worth up to £400 million over 15 years.

He conceded that some people could become millionaires, adding: "That's fine."

He said manufacturing in the UK had "collapsed" and needed a boost such as cheaper energy from shale gas. "It could be the saviour of manufacturing."

Ineos said there were lots of "scare stories and myths" about fracking, but insisted the process was safe. Wells had been built next to schools, churches and houses in the US, sometimes in the centre of large towns such as Fort Worth.

Mr Haywood said: "It is possible to drill wells in densely populated areas, but we don't think that is necessary."

Many of the applications are in rural areas and drilling can be done without too much disruption, he said. Ineos has hired three pioneers of fracking in the US to develop its plans.

Tom Greatrex, shadow energy minister, said: "Shale gas extraction cannot go ahead unless we have a system of robust environmental regulation and comprehensive inspection. But David Cameron's government have repeatedly side-lined genuine and legitimate environmental concerns to justify their desire to present shale gas as a silver bullet for all of our energy challenges.

"Early this month the Tories and Lib Dems voted against Labour amendments which would close loopholes in the existing environmental regulation for shale gas in the House of Lords - we will table similar amendments to ensure robust regulation in the House of Commons.

"Our proposals to ensure monitoring of methane in the groundwater, compulsory environmental impact assessments and a statutory 12-month monitoring period were all rejected by Government. As Ineos' investment brings the UK closer to commercial scale extraction of shale gas, the Government can no longer afford to ignore these much-needed reforms to the regulatory framework."

A Scottish Government spokesman said: "The Scottish Government believes that we should proceed cautiously and take an evidence-based approach to unconventional oil and gas extraction, including ensuring strong environmental protection and making sure that the views of communities are taken into account.

"As has been recognised by environmental NGOs, our approach is in stark contrast to the approach of the UK Government.

"In particular the Scottish Government has strongly opposed the UK Government's plans to grant automatic drilling access rights under homes no matter the views of householders.

"In June our revised planning framework made further regulations including a buffer zone and additional risk assessment.

"There are no planning applications for projects that propose the use of hydraulic fracturing (fracking) techniques in Scotland at this time.

"We strongly endorse the appropriate and robust regulation of drilling techniques such as fracking associated with the extraction of shale gas."

The spokesman continued: "Proposals for coalbed methane or shale gas production in Scotland will be studied closely with each proposal considered through the normal planning process and the appropriate regulatory regimes including SEPA's updated guidance on the regulation of shale gas and coalbed methane published in December 2012.

"We have also recently tightened planning policy on this issue including bringing in buffer zones. It is also vital that potential operators engage with local communities and the key regulators."

Scottish Conservative energy spokesman Murdo Fraser said: "Shale gas is a huge opportunity for Scotland and it is good to see that Ineos is intent on maximising its potential.

"Ineos has recognised that the future of Grangemouth is dependent on cheap shale imports or, if possible, a domestic supply.

"On our doorstep we have a source of energy that has the potential to increase our energy independence, create jobs, reduce carbon emissions and lower fuel poverty."

But Green MSP Patrick Harvie said: "Climate science tells us we already have access to far more fossil fuel than we can safely burn, so the public is quite justified in opposing these risky new techniques for extracting more gas.

"We should be looking to use our existing hydrocarbon supplies carefully and within limits, rather than chasing after more, as well as investing in clean technology that delivers long-term jobs and a safe environment.

"If Ineos think they can easily frack the Forth Valley they've got another thing coming. This is a highly populated area, and we've already seen serious opposition mobilised in local communities where coal bed methane drilling has been proposed. Anyone thinking of fracking in Scotland's central belt will face a similar wave of protest."

Caroline Lucas, Green MP for Brighton Pavilion, said: "It won't have escaped the public that the Ineos investment announced for shale gas exploration is roughly the same size as the UK's entire contribution to the Green Climate Fund, also publicised today.

"The Green Climate Fund was set up to help developing countries cope with the devastating impacts of climate change that many are already facing. The Energy Secretary is right to emphasise the need to help poorer countries develop using clean renewable technologies.

"But it's incoherent and irresponsible for the Government, at the same time, to be doing everything it can to build a new dirty fracking industry here in the UK."

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