Ineos Says Scottish Fracking Halt Threatens Grangemouth

Scotland's plans for a temporary moratorium on shale gas exploration threaten the existence of Ineos' Grangemouth complex, Gary Haywood, CEO of Ineos Upstream - the company founded to manage the Swiss-based petrochemical giant's future oil and gas exploration efforts - has told a conference in Edinburgh.

Plans for the moratorium in Scotland were announced at the end of January on the heels of the London parliament's decision not to resurrect the pan-UK fracking moratorium lifted in late 2012.

Although Ineos two years ago sealed plans to import 1.6 million t/y of shale gas-derived ethane from the US, Haywood said imports will not suffice to cover Grangemouth's feedstock needs.

The Scottish site "will need a shale gas revolution" to survive," the Ineos manager asserted. Without being able to tap Scotland's slumbering reserves, he said Grangemouth is "unlikely" to have a future.

Following the end of a protracted labor dispute at the site in late 2013, Ineos was offered loans from the Scottish and UK governments to finance an ethane terminal and storage tank for ethane at Grangemouth. Now under construction, the facility is scheduled to receive its first gas shipments in 2016.

Due to increasing demand from US shale buyers and the cost of liquefying the gas for transport, however, Haywood suggested that imports would be unable to keep the site competitive for more than 10-15 years.

Ineos has acquired two shale gas exploration licenses from the UK government covering more than 700 square miles near Grangemouth and is currently converting its remaining cracker at the site to run on ethane. The Scottish freeze on site development has effectively put exploration on hold, however.

Officials of Grangemouth's trade unions have called on Ineos to clarify Haywood's remarks. In exchange for workers' concessions that ended the 2013 industrial action, the company promised to keep the site open, said Pat Rafferty, Scottish secretary for the union Unite.

"Hundreds of millions of pounds in public subsidies, not to mention the financial sacrifice of the workers, was given up to ensure that Grangemouth remains open.

At no point did Ineos say this was dependent on developing indigenous fracking sources," Rafferty said.

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