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Ineos Proposes to Share 6% of Fracking Revenue With UK Communities

29.09.2014 -

Jim Ratcliffe, chairman of petrochemicals giant Ineos, which recently acquired a stake in a UK shale gas exploration license, has launched an initiative to promote public acceptance of hydraulic fracturing, or fracking.

The erstwhile UK chemical producer, now based in Switzerland, has pledged to return 6% of production revenue to landowners and communities, split 4% and 2% respectively, the UK Department of Energy and Climate Change (DECC) said.

In a video aimed at blunting the UK's highly vocal opposition to fracking, Ratcliffe said his company's offer - from which he said local communities could realize £300-400 million in benefits over a 10-15-year period - is "more generous than any to be put on the table so far." Altogether the Ineos chairman said, "We could be giving away £2.5 billion.

What we would like to do is emulate the situation in the United States, where communities benefit," Ratcliffe added. "If local communities get to share the benefits, shale will be a success in the UK."

Late last year, when DECC released a report suggesting that 100,000 km² of land across the country could be made available for drilling, the government said gas exploration companies should offer affected local communities £100,000 in benefits, along with 1% of gas production revenues.

Under existing legislation, the state owns all rights to any minerals found underneath properties.

The UK section of the environmental group Greenpeace called the Ineos announcement "just more of the same bribes and bulldozers approach that has already proved a failure. The industry forgets people have legitimate concerns about racking that won't be easily assuaged by cash sweeteners."

Saying that Ineos has a "very important role to play in the development of natural gas from shale in the UK," Ken Cronin, head of the trade organization UK Onshore Oil & Gas (UKOOG) said his group looks forward to discussing the proposal in detail. At the same time, however he hinted that it may be premature.

Ineos' proposal relates to the production phase," which is still some years off," Cronin said. "The focus in the next few years will be drilling exploration wells and determining how much of the gas underneath license areas is economically recoverable.

The chemical company's 51% share in one of the first exploration licenses awarded by the UK government, acquired from the BG Group in August, covers a 127-square-mile stretch of Scotland's Midland Valley, where its Grangemouth refinery is located. Minority partner is Dart Energy, which is in the process of being taken over by London-based IGas, one of the most active proponents of fracking in the UK.