U.K. Shale Gas Will Help Chemical Producers Compete, Ineos Says

The U.K.’s shale gas, an untapped resource that has polarized politicians and environmentalists, will help refiners and chemical makers be competitive by cutting costs and curbing imports from rivals, Ineos Group AG said.

Britain’s shale will be “of massive importance as a protection against low-cost petrochemicals from abroad,” Tom Crotty, director of the producer that has plants in Scotland and France, said by telephone.

Chemical makers may benefit from cheaper gas should shale be exploited in Britain, which has seen North Sea supply wane as fields age. The government is keen to tap reserves in northwest England in a bid to replicate the surge in U.S. output that cut energy costs and boosted the economy. Environmental groups and residents have said the drilling may contaminate ground water.

Ineos needs gas as feedstock for chemicals production and as a fuel to operate its sites. The company is “talking to lots of people” about potential supplies from U.K. shale fields, Crotty said yesterday, without elaborating.

Britain’s nascent shale industry is also attracting interest from refiners. Essar Energy Plc (ESSR), a unit of Mumbai-based Essar Group, is in “preliminary talks” with potential shale gas suppliers, Andrew Turpin, a London-based spokesman, said by phone, declining to identify any. Essar uses gas to generate steam for boilers at its Stanlow refinery in northwest England.

Estimates Raised

The government said in June that shale-gas fields in northern England are twice as large as previously estimated, and may hold as much as 1,300 trillion cubic feet. A recovery rate of 10 percent -- similar to fields in the U.S -- would give the U.K. enough gas to meet demand for about 47 years.

Explorers Cuadrilla Resources Ltd., IGas Energy Plc (IGAS) and Dart Energy Ltd. (DTE) have licenses in British shale areas. Centrica Plc (CNA), the largest energy supplier to U.K. households, agreed in June to buy a 25 percent stake in Cuadrilla’s permits in northern England, becoming the biggest company to enter the country’s shale industry.

The government plans to give tax breaks to stimulate exploration and production from shale, which involves blasting a mixture of water, sand and chemicals below ground to fracture rock and release the fuel, a process made possible by advances in drilling technology.

“We’ve got a favorable investment climate here,” said Menno Koch, an executive at Lambert Energy Advisory Ltd. in London. “If it works at a technical level, we could have commercial production in five to 10 years.”

Ineos’s Scottish chemicals plant and refinery are 25 miles west of Edinburgh. Dart Energy operates nearby, with a license 30 miles northwest of the city covering 329 square kilometers (127 square miles). Like Cuadrilla, it has sought a partner to help develop its prospects.

Dart is “busy” pinning down a deal to bring in an investor, Chief Executive Officer John McGoldrick said in an interview on July 4. “There’s been lots of interest from big and small companies.”

To contact the reporter on this story: Nidaa Bakhsh in London at nbakhsh@bloomberg.net

To contact the editor responsible for this story: Will Kennedy at wkennedy3@bloomberg.net

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