Plans of petrochemical giant Ineos to import shale gas from the USA will secure future of the Grangemouth plant for several years - but will happen after that?

No future for Grangemouth without fracking firm says

The owner of the Grangemouth petrochemical plant in Scotland doubts the factory could be sustainably operated in the future unless local sources of shale gas will be developed.

Speaking at a conference in Edinburgh, Ineos Upstream chief executive Gary Haywood said the recentlyapproved practice at the factory to import cheap shale gas from the USA won’t be cost-effective in the long term.

"I think it is going to be very difficult because when you are shipping in material of that nature you are always at a disadvantage,” he said.

"It is a very special situation at the moment... with ethane being available in the US at very low prices, because of the rapid increase in production and the lack of demand in the US.

"That has meant we have been able to get that ethane at very, very cheap prices, relatively speaking.

"We can't see that going on. Unless we can develop an indigenous source, it is unlikely that the cracker (at Grangemouth) has a long-term future."

Ineos has earlier described it plans to use shale gas as a raw material in its chemical plans and has already acquired fracking licenses covering an area of about 700 square miles in central Scotland.

However, its plans to pour hundreds of millions of pounds into shale gas exploration could hit a wall as Scotland pushes forward with a moratorium on planning consents for hydraulic fracturing.

Regardless of the moratorium, Haywood remains hopeful the firm could be producing shale gas locally within ‘three to five years’.

"If you look forward five years, it is possible we could be producing gas from that point onwards," he said.

"That would mean that we have some time to develop the resource and replace what we get from the US.

"Can we do that efficiently enough to make Grangemouth make sense in the future? That is a real challenge."

In support of the case of fracking, he pointed to an example of another Ineos-operated facility located in Houston, Texas.

"It is a big employer of people ... the economics and the local community has benefited greatly," he said in reference to shale gas extraction.

"Grangemouth is somewhat lacking in the sense that it has found a stop-gap solution to the problems that are facing it."

Ineos recently invested into an ethane terminal to deliver US shale gas to Grangemouth. The project, to start operating next year, is expected to cover Grangemouth’s needs for the next ’10 to 15 years.’

"But at that point I have got no doubt that US capacity will have caught up and it will not make economic sense to bring this stuff over," Haywood said.

The conference, organised by the Scotsman newspaper, also heard from Gordon Hughes, professor of energy economics at the University of Edinburgh.

He said: "From the point of view of the Scottish Government, we have done enormously well from out of offshore oil and gas, but that's going away, that is not going to be a big resource in the future.

"The question is what replaces it."

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