An Ineos-owned tanker, carrying 27,500 cu. meters of ethane (produced by fracking shale in western Pennsylvania), reached Grangemouth, the site of the company’s Scottish petrochemicals plant.
Ironically, the first-ever shipment of US shale gas arrived in Britain less than 24 hours after the UK Labour party vowed to ban fracking (the Scottish government already has a moratorium on all fracking in Scotland).
Fracking remains a controversial topic in the UK, as it does in some parts of the US, as environmentalists and some politicians express concern about its environmental impact.
With supplies of the UK’s North Sea gas reserves in decline, chemicals giant Ineos and its supporters are looking to cheap US shale gas imports to transform the economics of Grangemouth by creating a chemical and manufacturing hub.
The company is looking to supply low-cost US ethane from natural gas (a building block for plastic production) to not just Grangemouth, but to other chemicals facilities in the UK, such as Ineos’ plant in Hull and the Exxon Mobil/Shell ethylene plant in Fife.
The market opportunity of cheap shale gas economics has not only persuaded Ineos to invest millions of pounds in its chemicals plant in Hull, but has also encouraged other players to get into the act. Saudi chemicals firm SABIC, for instance, has announced that it will make a major investment in its petrochemicals plant on Teesside and begin to import natural gas liquids.
Back in 2012 Chevron Phillips Chemical EVP Mark Lashier predicted that the US plastics industry may spend $30 billion to build factories to convert cheap US natural gas into plastics. He believed that natural gas liquids (primarily ethane) can be produced in enough quantity from shale gas fields to support the construction of five new US plants (at $5 billion-$6 billion apiece) to produce ethylene and related plastics.
It’s early days in the UK, but perhaps fracking, US shale natural gas production, and, in particular, the abundance of low-priced ethane can bring about a renaissance of the moribund UK chemicals industry too.
But Ineos does not just want to be an importer. It would like to become a leading UK natural gas player in order to generate its ethane supply locally if fracking ever takes off in that country. (The company was awarded 21 new UK licenses late last year, including sites in North Yorkshire, the north west, and East Midlands — shale gas fields, ready for exploratory drilling.)
But in the meantime, in the face of political opposition to fracking, Ineos is importing one of the fruits of fracking — cheap ethane — from the US.
British editorial veteran Stuart Hampton has been covering oil and gas companies for Hoover’s since the Neogene-Quaternary period. Well, actually, since the early 1990s. For the best overview of the oil industry and its history he recommends Peter Doran’s “Breaking Rockefeller” and Daniel Yergin’s “The Prize.” You can also follow Stuart on Twitter.