Ineos has sought to reassure 1,300 staff at its Grangemouth petrochemical plant that it has a long-term future after one executive warned that a fracking moratorium had cast doubts over the business.
Gary Haywood, the executive leading the company’s fracking plans, told a conference last week that Scotland’s biggest manufacturing plant, also one of the country’s biggest employers, could only rely on cheap supplies of US-sourced ethane gas for up to 15 years. After that, gas from local fracking projects would be needed, Haywood indicated.
He said: “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.”
Haywood’s comments unsettled workers at Grangemouth because Ineos declared the plant’s future secure in 2013, after it reversed a decision to close the site following a rancorous industrial dispute.
In a message to employees, seen by the Guardian, John McNally, chief executive of Ineos’s UK petrochemicals arm, told Grangemouth employees some of Haywood’s comments “had been taken out of context” and that the site believed it had secure supplies until 2031 at the earliest.
McNally wrote: “The reality is that we have at least 15 years of assured gas supply from the US starting in 2016, which assures the future of the business in the medium to long term. Predicting what happens after that is, of course, more difficult. If shale gas developments have occurred in the US or different parts of the world, then we may be able to continue to import ethane competitively from various sources for many years into the future, but that is not guaranteed.
“We believe that the best way to assure the long-term success of the business is for the UK to develop its own indigenous shale gas resources, and that was the point of the comments that were made by the company earlier this week.”
In settling with Ineos in October 2013, Grangemouth employees accepted a pay freeze, the closure of their final-salary pension scheme and other changes to employment terms. In return, Ineos said it would invest to import US shale gas to run its giant KG gas cracker at full capacity, keeping Grangemouth open.
Switzerland-based Ineos has made it clear that it wants to be a leading operator in a push to reproduce the US shale gas boom in the UK. But the Scotttish government has declared a moratorium on fracking amid public disquiet over the effects of drilling deep into rock to extract gas.
Jim Ratcliffe, the billionaire who controls Ineos, pledged in November to invest £640m in an attempt to jump-start the UK fracking industry. He said his initiative could make millionaires of rural villagers while reducing energy prices that were causing pain for consumers and manufacturing businesses.
In August, Ineos bought the rights to explore fracking for shale gas in a 127 sq mile area around Grangemouth and the Firth of Forth.
An Ineos spokesman said McNally’s note to staff sought to put Haywood’s comments in context but there was no difference between their positions. “During the conference, Gary Haywood, CEO of Ineos Upstream, made it clear that Grangemouth has over 15 years of assured gas supply from the US which assures the site’s future in the medium term,” Ineos said.
“After this, the site will either have to try and renegotiate the US contracts or look for alternative ethane sources that are competitively priced. In Ineos’s view, the best way to ensure the long-term success of Grangemouth, one of Scotland’s largest manufacturing businesses, would be to develop an indigenous shale gas industry.”
By Sean Farrell