Scotland’s largest petrochemical plant at Grangemouth is unlikely to have a long-term future unless an indigenous shale gas industry can be developed, according to the firm that owns it.
Chemicals giant Ineos proposes using shale gas as a raw material for its chemicals plants, and has revealed plans to put millions into exploration.
But developing the industry could be stalled or even prevented after the Scottish Government announced a moratorium on granting planning consents for hydraulic fracturing, or “fracking” – the means of extracting the gas.
The moratorium comes amid growing public concern over the environmental and health impact.
Ineos has already invested in an ethane supply project at Grangemouth which will allow the firm to import, store and use cheap shale gas from the US.
But Ineos Upstream chief executive Gary Haywood said the move was not a long-term solution.
The company has also acquired more than 700 square miles of fracking exploration licences in central Scotland.
Speaking at a conference in Edinburgh, Mr Haywood said it was feasible to get a shale industry up and running in the UK “within three to five years”.
“If you look forward five years, it is possible we could be producing gas from that point onwards,” he said.
“That would mean that we have some time to develop the resource and replace what we get from the US.
“Can we do that efficiently enough to make Grangemouth make sense in the future? That is a real challenge.”
Commenting on the future of the plant without an indigenous shale gas supply, he said: “I think it is going to be very difficult because when you are shipping in material of that nature you are always at a disadvantage.
“It is a very special situation at the moment… with ethane being available in the US at very low prices, because of the rapid increase in production and the lack of demand in the US.
“That has meant 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.”
By comparison, Mr Haywood said another Ineos cracker, located in Houston, Texas, has benefited “substantially from the shale gas revolution” in the US.
“It is a big employer of people … the economics and the local community has benefited greatly,” he said.
He added: “Grangemouth is somewhat lacking in the sense that it has found a stop-gap solution to the problems that are facing it.”
Mr Haywood said investment in the ethane supply project at the plant – which will start importing ethane from the US from next year – means it will have “competitive stock” for the next 10 to 15 years.
“But at that point I have got no doubt that US capacity will have caught up and it will not make economic sense to bring this stuff over,” he said.
The conference, organised by the Scotsman newspaper, also heard from Gordon Hughes, professor of energy economics at the University of Edinburgh.
He said: “From the point of view of the Scottish Government, we have done enormously well from out of offshore oil and gas, but that’s going away, that is not going to be a big resource in the future.
“The question is what replaces it.”
He added: “What we need to focus on is the choices that we have to make.
“In the end, if the public decides that it wants to be cold and green, fine. That’s the choice, having had a proper discussion, that it can reasonably make.
“On the other hand, let’s not wander into that simply by ill-formulated and ill-thought through political posturing.”
Prof Hughes added that there was a fear of governments getting into a position where there is an “unwillingness to take any decision”.
He also said it was doubtful that any new scientific information would be gathered from further reviews of fracking being undertaken now.
“There is no obvious reason why things will be any different in two years’ time,” he said.
For more oil and gas news click here.