INEOS acquires majority stake in UK shale gas licence

LONDON (ICIS)–INEOS Upstream Limited has signed an agreement to acquire an 80% stake in a shale gas licence in Scotland, the UK, from Reach Coal Seam Gas Limited (Reach CSG), the Switzerland-headquartered chemical major said on Monday.

INEOS has acquired the stake in Petroleum Exploration and Development Licence (PEDL) 162 in the Midland Valley of Scotland, and covers a 400 sq km area.

The field is located next to INEOS’ PEDL 133, covering 329 sq km, in which the company acquired a 51% stake in August. It is also close to INEOS’ Grangemouth chemical site.

As part of the agreement, “INEOS will be the operator of the licence, and will fund the initial appraisal activity (consisting of two vertical science wells and 100 sq km of 3D seismic),” it said.

INEOS added that it still needs to test if resources in the field can be economically extracted. The company quoted the British Geological Survey (BGS), which in June identified significant shale gas and oil resources in the Midland Valley area. The report had the backing of the UK government.

“We are keen to move quickly to evaluate the potential of this resource, and determine if we can economically produce gas from this area. If we can, it will provide a local source of competitive energy and raw materials to support manufacturing jobs in Scotland,” said the CEO of INEOS Upstream, Gary Haywood.

Haywood also referred to the benefits which shale gas could bring to locals after INEOS received clearance from the UK’s Department of Energy and Climate Change (DECC) in September to acquire a 51% interest in the PEDL 133 stake with a proportion of revenues generated from the licence block to go to local landowners.

The announcement of the PEDL 162 acquisition comes a week after INEOS’ director Tom Crotty on the sidelines of the European Petrochemical Association (EPCA) meeting in Vienna said the company was seeking new rights under the UK’s 14th onshore licensing round to expand its fledgling shale gas business.

The INEOS move into shale gas exploration and production in the UK is a logical step following its $600m project to import ethane from the US for two of its crackers in Europe, Crotty said.

Beyond 15 years – when its current agreements to secure shale gas ethane in the US and transport it to Scotland and Norway expire – the company needs an indigenous shale industry, he added.

INEOS will take a manufacturing style approach to fracking and shale gas production, possibly in formerly industrialised areas of the UK and intends to fully exploit the potential of the reserves it might have access to, Crotty said. “We are aiming to do it, not sit on it,” he added.

Additional reporting by Nigel Davis