INEOS greenlit for UK shale block stake, 6% of revenues to landowners

LONDON (ICIS)–INEOS has received clearance from the Department of Energy and Climate Change (DECC) to acquire a 51% interest in a shale gas exploration block in Scotland, the UK government body said on Sunday, with a proportion of revenues generated from the licence block to go to local landowners.

The Switzerland-headquartered chemicals producer also announced on Sunday that it intends 6% of the proceeds from its stake in the licence to go homeowners, landowners and communities near the well sites.

The 51% petroleum exploration and development licence (PEDL) stake was acquired from UK-headquartered natural gas specialist BG Group, with the remaining 49% held by Australia-listed coalbed methane specialist Dart Energy.

The licence covers a 329 square km (205 square miles) area across the Midland Valley area of Scotland, including the land surrounding INEOS’ Grangemouth refinery and petrochemicals complex.

INEOS is a non-operating partner in the licence, meaning that they share costs, benefits and have a say in what happens on the plot, but operations are only undertaken by Dart, DECC added.

The company added that it intends to disburse 4% of revenues from the licence to home- and landowners living above its shale gas operations, and 2% to communities, which it says could amount to £2.5bn over the lifespan of the wells expected to be drilled in the area.

INEOS estimates that residents in a shale gas community – which it describes as a 100 square km zone with around 200 wells – would receive £375m in proceeds over the life of the project.

Shale gas exploration has been met with resistance in the UK, with analysts noting that differences in land ownership rights between the US and much of Europe represent a potential road block to development of the continent’s unconventional gas sector.

In the US, landowners also own the mineral rights to the land below their homes, whereas in much of Europe, residents only hold surface rights, meaning there is less of a direct financial incentive for communities to allow shale gas exploration in their areas.

INEOS, which expects to use shale gas as a fuel and feedstock at its Grangemouth complex, claims that shale gas could make up a significant proportion or even the total of UK gas requirements in future.