News focus: UK poised to benefit from shale gas more than rest of Europe

06 September 2013 10:04  [Source: ICB]

The UK chemical sector stands to benefit from shale gas more than any other European country thanks to a positive political environment and its large reserves, according to UK trade association the Chemical Industries Association (CIA).

Unlike in many parts of Europe, the UK government is actively encouraging shale gas exploitation, and with reserves that could last up to 40 years, this could help fuel chemical-using industry growth of around 50% by 2030, said Steve Elliott, CEO of the CIA.

 

 Elliott: Europe must grasp the nettle when it comes to shale

POLITICAL APPETITE
"Looking across Europe - at the number of crackers - two out of three European gas crackers sit in the UK, so if you consider that advantage plus the political appetite - which is greater in the UK than any other European country - then we're in a very good position.

In terms of commercial and political appetite - notwithstanding the big issues of reassuring the public and the permitting and compliance regime - we're in a much better place than probably any other European country - including Poland."

Elliott said there are two big opportunities for UK chemicals: one is ensuring that we can secure more competitive energy supply and cost for an industry that is very energy-intensive. The other involves gaining access to more competitive feedstocks.

In the autumn the CIA is launching a new strategy on securing long-term growth for UK chemicals which focuses partly on shale gas as an ingredient in fuelling a 50% boost to Gross Value Added to the UK economy by 2030 from £195bn (€228bn/ $302bn) in 2012 to £300bn. Access to competitive feedstocks is key, together with accelerating innovation and rebuilding chemistry supply chains.

DIRE CONSEQUENCES
Early attempts at shale gas exploration have already proved controversial in the UK. But if the country fails to exploit its reserves, the consequences could be dire, according to Elliott.

"That would leave us in a pretty difficult position. We've already seen the extent of new petrochemical investment into the US because of their exploitation of shale gas. That didn't happen overnight so we need to move quickly now."

He said the European-based CEOs are already citing the US as being the place to invest, as well as the Far East and to some extent the Middle East. "They're not talking about Europe - except to say that the clock is ticking. Not only do we face the significant price differential on gas but in time, if we don't do something about it, we'll also see ever more competitively priced articles coming out of the States and competing with European products."

He said the trickle-down effect to the broader manufacturing base could be significant. The CIA has done a lot of work with the government about how to better link the chemical industry as a supplier to the aerospace, automotive, electronics and life sciences areas. "All of these sectors will feel the heat if we don't grasp the nettle on shale gas."

Elliott recognises that there are some very legitimate concerns about fracking, which makes it vital that it is only allowed to develop within a tough regulatory environment.

"Many of these chemicals will have to respond to regulatory requirements under [European regulations] Reach or the Biocidal Products Directive. That's an important piece of work that needs to be done to reassure the public."

He also highlighted concerns about water usage and seismic activity. "A lot of water is used but to keep it in perspective we're talking about under 1% of the UK's water requirements to help deliver this. There are also concerns about seismic activity. But the tremors we've seen in the north of England equate to the sort of level you'd see from normal mining operations in the 1950s and '60s."

He added: "Having said that, people need reassurance and they need to be listened to, worked with, appropriately supported - whether financial or via regulatory reassurance - all of that work needs to happen and we want to play our part in making it happen."


2030 CHEMICAL STRATEGY
The 50% growth figure mentioned in the new Strategy for delivering chemistry-fuelled growth of the UK economy is predicated on the UK continuing to pick up in GDP, and on chemicals reflecting that GDP growth

According to Elliott, the growth really kicks off in 2020s-2030s because it will take time to develop new infrastructure for shale gas and other initiatives. It assumes that there will be a pilot scale shale gas plant providing energy flow to the national grid by 2014, with commercial flows by 2017.

Chemical groups with large UK operations, such as INEOS, SABIC, AkzoNobel, Syngenta and Croda, are involved in the initiative, which was presented in early July to Michael Fallon, Minister of State for Energy in the Department of Energy and Climate Change. A Chemistry Growth Partnership, consisting of industry and government representatives will drive the strategy after its launch.

"The government has signalled its support for implementing this," said Elliott


By: Will Beacham
+44 20 8652 3214



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