INEOS’ Europe $2bn investments possible thanks to shale - exec

13 June 2017 11:17 Source:ICIS News

Tom CrottyLONDON (ICIS)--The $2bn investments announced by INEOS this week match the company’s strategy to develop gas-based units which, in the long run, could be boosted by its own domestic shale gas production, according to an executive at the Switzerland-headquartered chemical major.

The company announced on Monday plans to develop a propane dehydrogenation (PDH) unit in Europe and ramp up capacity at two crackers in the region to an extent that would equate the construction of a “world-scale” cracker.

INEOS director Tom Crotty confirmed to ICIS on 12 June that the company expected to invest $1bn in development of the 750,000 tonne/year PDH plant, most likely in Antwerp, Belgium. Expansions at the company's crackers in Grangemouth, UK, and Rafnes, Norway, are expected to cost the company $500m apiece, he added. 

The duration of each of the projects is expected to be three years, the company said, but declined to disclose when each is expected to begin.

Crotty explained that INEOS suffers a chronic shortage of propylene and ethylene in Europe, a shortage which had become “too big” and prompted it to build the PDH unit to produce propylene and expand its two crackers to obtain ethylene.

PDH is one of the process through which monomer propylene can be obtained.

However, INEOS currently runs a shortage of 1m tonnes/year in propylene. The planned PDH plant, Crotty admitted, would not completely make up the shortfall in in its operations.

“The shortage is certainly larger than the amount [of propylene] we’ll produce [in the new PDH unit]. We will still need to purchase some propylene,” said Crotty, who added that the company’s decision on location was tilting towards Antwerp.

“It is the most preferred location for us. We have got land, it has good export and import facilities and a lot of our propylene demand is in that area, so all indicators point there [as PDH unit location]. We are not closing our mind to other locations, like Cologne [Germany], but Antwerp seems to be the place,”  he added.

The plant would create between 60 and 70 job positions, he said. 

Antwerp sits in the Antwerp-Rotterdam-Amsterdam (ARA) chemical hub, one of the largest chemicals and petrochemicals production and distribution centres in Europe.

The cracker expansions at Grangemouth and Rafnes are expected to bring capacity for both units to over 1m tonnes/year. This would bring capacity at the Grangemouth site to around the levels it had stood at before INEOS moved to close the smaller G4 cracker at the complex, citing poor economics and difficulties in sourcing feedstocks.

Furhter investments in Rafnes would also secure the economics of shale gas continue paying off for INEOS, he said, after the company said it has already invested $2bn in vessels able to transport ethane from the US into Europe.

“The economics on the import side are pretty simple," said Crotty. "For us, it is not an issue of gas versus crude oil, because if you have a gas-based cracker the important comparison is gas to gas. And the price of ethane [gas derivative] in Europe, if you can get any, is higher than the one you can bring in [with vessels].”

“At Grangemouth, for instance, we were running [the cracker] at 40% of its output because we couldn’t get hold of the ethane,” he added.

After the investment in upstream assets the company has undertaken in the last months – with the acquisition of a pipeline system in the North Sea from UK’s energy major BP and the acquisition of the oil and gas business from Denmark’s DONG Energy – Tom Crotty said the company continues looking at assets upstream, although would not disclose any further details.

What the company also hopes to develop in coming year is shale gas production in the UK, and Crotty said that he hoped a diminished majority for the Conservative Party – supporter of shale gas production – after the 8 June general election would not endanger plans to develop the technology in the country.

The opposition Labour Party opposes hydraulic fracturing (fracking), which is used to extract shale gas.

“Clearly, there is opposition [to shale gas], no question of that. Our view is that the best way to prove this technology is start using it so people can see it’s not the nightmare the opposition [parties] have spoken about,” said Crotty, adding INEOS was hoping to commercialise gas from fracking in the UK within three years.

“We are a long way away from [Labour leader] Jeremy Corbyn running the country. The party stance, pre-Corbyn, was pro-shale and some Labour MPs [members of parliament] are very vocal on being pro-shale. I wouldn’t write off shale on that basis – there is too much benefit for the country.”  

Another outcome from the election was a fall in the value of the UK’s sterling pound, as a minority government made investors wary of political instability as the country enters talks with the EU to negotiate its exit, planned for 2019.

However, INEOS is very “pound-insulated” and the fall in its value would not affect it greatly, the executive said.

“We don’t care that much, to be honest. We are fairly pound-insulated. The dollar/euro exchange rate is much more important for us, because we buy a lot of material in dollars and we sells it in euros, and we also account in euros.”

Interview article by Jonathan Lopez

By Jonathan Lopez