Ineos’s fracking dream hits a squall

Ineos tanker

Ineos is starting to ship shale gas from the US to the UK

Jim Ratcliffe has a message for Britain. The billionaire founder of chemicals giant Ineos believes shale gas is good for manufacturing – and he wants everyone to know about it.

And so, as dawn broke over the Firth of Forth today, media were invited to witness his Ineos Insight ship sail under the Forth Bridge, a lone piper and Britain’s first import of shale gas on board – and the words “SHALE GAS FOR MANUFACTURING” emblazoned in massive letters on its side.

It wasn’t exactly subtle, but then Ratcliffe is clearly not the kind of man who does things by halves.

Faced with declining North Sea supplies of ethane rendering Ineos’s Grangemouth petrochemicals plant unprofitable, he could well have shut the site down several years ago.

Instead, he embarked on Ineos’s most ambitious project to date and what, by his own admission, was “quite a gamble”: creating a “virtual pipeline” to import replacement ethane from the United States, where the shale gas revolution has made it abundant.

Ineos is taking gas extracted by fracking shale rocks two miles underground in West Pennsylvania, separating out the ethane and transporting it 300 miles through a newly constructed pipeline to the east coast. There, it is supercooling it at a new export terminal and then shipping it 3,500 miles across the Atlantic using a specially designed new fleet of ships.

Tuesday lunchtime was supposed to mark the culmination of that journey: the first ship’s arrival at Grangemouth, where it was to be greeted by a full pipe band and about 300 guests.

Unfortunately for Ratcliffe, Ineos’s gamble on the weather backfired. 

With wind threatening to blow Ineos’s party marquee away, it was left to admit that its prize ship had been unable to safely enter the Grangemouth lock as gusts hit 50 knots – and was instead retreating back up the firth.

“Don’t you love the Scottish weather,” Ratcliffe deadpanned. “All these challenges we had to face in this project but we couldn’t cope with the Scottish weather.”

While Ineos’s detractors cheered its misfortune today, it is unlikely to be more than a temporary setback. And when the wind subsides and the first ethane cargo arrives, which could be as soon as Wednesday, Ineos says the fortunes of the UK’s largest chemicals site should be transformed almost overnight.

For the best part of a decade the plant’s giant gas “cracker”, which turns ethane into ethylene for use making plastics, has been running at only half its capacity due to lack of feedstock.

The new US supplies should allow it to ramp up to full production again, with an ethane ship expected to be arriving once every week within a year.

From losing hundreds of millions of pounds a year a few years ago, Grangemouth should become “significantly profitable”, making as much as £100m a year.

“Without shale gas, it wouldn’t be here today,” Ratcliffe says.

So far, so hard to argue with.

But Ratcliffe doesn’t just want to prove the merits of shale gas imports: he also wants to spearhead a domestic UK fracking industry.

Ineos The Ineos plant at Grangemouth

Here, too, he has taken a characteristically bold approach, entering the market in 2014 with a pledge to spend up to $1bn and scooping up more exploration licences than any other company when the Government awarded drilling rights last year.

His argument is simple: that only domestic shale gas production from fracking can help revive British manufacturing which, he says, has “collapsed” over the past decade.

“I don’t think it’s good for UK to have no manufacturing. Saving Grangemouth is a brick in the wall to arresting that decline but if we do develop a shale gas industry in the UK maybe that has the potential to reverse that decline,” he argues. “There clearly is a lot of shale in the UK and there is no reason it can’t do the same things to UK manufacturing industry as it has in America.”

As yet, there is little sign of that: not a single well has been fracked since 2011 amid fierce criticism of shale gas on environmental, climate and Nimby grounds.

While Ratcliffe concedes accidents will sometimes happen, he says fracking can be carried out safely and insists it is basic economics that it will herald cheap energy for the UK. He hopes “common sense will prevail”, insisting there is “no science behind the arguments” made by a “vocal minority”.

But for his critics, such as Greenpeace, it is Ineos’s arguments that don’t stack up. Last week, the UK advertising watchdog ruled in favour of the environmental group’s assertion that most experts agree fracking won’t cut energy bills

“Ineos’s publicity stunt is riddled with overblown and outdated claims about the benefits of fracking,” Hannah Martin of Greenpeace says.

While the British Government has so far maintained support for fracking, the SNP has imposed a moratorium on the practice in Scotland – meaning Ineos cannot explore licences near Grangemouth itself – and snubbed yesterday’s event. The Labour Party on Monday pledged to outlaw fracking if it wins power.

When it comes to winning the argument on the merits of domestic shale gas, it seems Ratcliffe may be battling the headwinds for some time.




In Ohio, frackers are drilling. Soon Ineos will be doing the same in Britain

A gas flare burns at a fracking site in rural Bradford County, Pennsylvania.

A gas flare burns at a fracking site in rural Bradford County, Pennsylvania. Drilling on some eastern US shale fields goes on 24 hours a day. Photograph: Les Stone/Reuters


Red velvet curtains hung on the windows and painted cherubs played on the ceiling as Jim Ratcliffe accepted the 2016 ICIS Kavaler Award at the Metropolitan Club in New York last week.

The British billionaire is the first foreigner to be awarded the honour, given by leaders in the chemical industry. It comes as Ineos, the chemicals company he founded, plans to bring fracking – the controversial oil and gas extraction process – back to the UK.

Ineos is planning as many as 30 applications for fracking sites in the UK within the next year. As part of its campaign to win over critics, Ineos invited journalists to tour fracking sites in Pennsylvania operated by Consol, a Pittsburgh-based producer of natural gas and coal and, supposedly, an example of why fracking will be good for the UK.

What’s in store for the UK can be seen about an hour southwest of Pittsburgh, in township of Switzerland, Ohio, where a rig stands near a farm. The well is in its earliest stages: drilling goes on 24 hours a day, seven days a week. Sitting in a big armchair surrounded by screens, “T-Ball”, a burly 6ft drill operator, works 12-hour shifts, controlling the drilling like a video game. He does this for two-week stints. At night, another person takes over – also working a 12-hour shift.

Ineos estimates that it will be at least five years before any of its UK wells are actually producing shale gas.

Fracking will be good for Britain, according to Ineos, making it more independent and creating jobs. By 2018-19, about 69% of UK gas will be imported.

Fracking, Ineos says, would help the UK become less dependent on other nations and would supplement dwindling North Sea resources. A 2014 Ernst & Young report predicts that fracking could create more than 64,000 jobs.

It has certainly been a boon to the US jobs market – albeit one with a sting in its tail. A National Bureau of Economic Research study published last year found that, between 2005 and 2012, the fracking boom added as many as 640,000 jobs in the US in the energy industry and related services. But boom turned to bust as oversupply led to tumbling oil prices, stalled production and layoffs. Since 2014, the US energy and mining sectors have shed more than 223,000 jobs.

Despite the appeal of energy independence and possibility of thousands of new jobs, many UK residents remain opposed to fracking due to concerns over environmental damage, climate change and the possibility of tremors.

In the process of fracking, water, sand and chemicals are forced into the ground under high pressure to extract natural gas. Earth tremors have been linked to disposal wells – where excess water from drilling is injected back into ground – created during the process.

Jim Ratcliffe of Ineos.
Jim Ratcliffe of Ineos. Photograph: Christopher Thomond for the Observer

There has been no fracking in the UK since 2011, when Cuadrilla Resources’ operations were said to be a “highly probable” cause of two earth tremors in northwest England. The moratorium on fracking was lifted in May 2013, but no fracking well proposals were actually approved until earlier this year, when North Yorkshire county council gave the go-ahead to an application by Third Energy.

“Drilling does not cause earthquakes,” said Tim Dugan, chief operating officer of Consol. According to Dugan, seismic testing has improved over the years and data shows faultlines that could potentially cause tremors, allowing drillers to avoid them.

But the consequences of unfettered fracking are clear in the US. A study by the US Geological Survey showed that increased fluid pressure in geological fault zones from disposal wells has increased earthquake vulnerability in a some states. As a result, parts of Oklahoma and Kansas now face earthquake risks on a par with California.

Ineos insists that fracking in the UK will be different. For one, the technology has come a long way over the past decade. As the US fracking industry has matured, lessons were learned, making it easier to replicate best practices on fracking sites in the UK.

To ease the inconvenience of light, noise and traffic during drilling, Ineos has also pledged 6% of its profits to the UK communities where it will frack.

But fracking in the UK still faces stiff opposition from communities where drilling is planned, and from environmental campaigners.

There is no way fracking can be done responsibly, “no matter what regulations are proposed”, according to John Detwiler of the Marcellus Protest coalition, an environmental pressure group in Pennsylvania. He said many company-sponsored fact-finding trips to Pennsylvania were “merely window-dressing for decisions being made in back rooms”.

“Naturally, the drillers, and the government officials whose election campaigns they’ve sponsored, can be expected to put on a good show for invited visitors, but the truth is that fracking has not been a success in Pennsylvania,” he said.



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