CONSERVATIVE MEP FOR SCOTLAND

Fracking blog- Not in my Back Yard

28.01.2015.

When a strike closed the Grangemouth refinery back in October 2013, 70 North Sea oil platforms halted production.  The mainstay of Scotland’s oil industry, the Forties pipeline, ran dry for 3 days at an estimated cost of £150 million to the UK economy. Crucially for Scotland, over 1,000 jobs were put at risk

The cause of the dispute was simple, with the plant hemorrhaging money (a loss of £140m in 2013 alone), owners Ineos implemented a survival plan which included job losses and a freeze on salaries.  At the time, political parties were united in their efforts to save the plant and save the jobs and the expertise built over decades.  Rightly so. However, less attention was focused on perhaps the more glaring question; why was an oil refinery situated next to one of the most productive oil reserves on the planet losing money?

Time for some chemistry.  Grangemouth is one of only four plants in Europe that can convert gas into ethylene.  Ethylene is everywhere. It’s the main ingredient in plastics, from polythene and polystyrene and polyester to dyes, solvents, even shampoo.  

The rising cost of extracting North Sea gas meant that Grangemouth struggled to produce ethylene on a competitive basis, struggling in particular to compete with the far cheaper American fracked gas, which is 75% cheaper than North Sea gas.

Ineos’s solution was quite elegant.  If you cannot compete against cheaper US fracked gas, import the cheaper fracked gas from America.  Even after trans-Atlantic shipping costs, US gas is still 50% cheaper than our dwindling North Sea gas. Whatever your views on onshore fracking, after completion of the ethane storage tank and dock at Grangemouth, we will all be consumers of fracked shale gas.  

Ineos are not daft.  Not only have they secured the future of Grangemouth on the basis of US fracked gas, they have also worked out that they could reduce costs by a quarter if they could only source local onshore gas in Scotland.  Hardly surprising that the owners of Grangemouth are the principal bidders for the onshore gas fields of the Forth Valley.  The gas could literally be pumped into the plant.

The British Geological Survey estimates the shale gas resources of Scotland’s Central Belt at 80 trillion cubic feet of shale gas, with a further 1,300 trillion cubic feet of shale gas in the North of England (which could be piped to Grangemouth). Now not all the gas will be recoverable - the UK has complicated geology - but it still represents a significant asset.  Scotland also has six billion barrels of shale oil.  Enough to keep Grangemouth (and ExxonMobil’s Fife ethylene plant) in business for decades to come.

It may be that those protesting the onshore fracking in the vicinity of Grangemouth are content to have the plant run solely upon imported fracked gas.  Fracking in someone else’s back yard being preferable to their own.  However, it is worth bearing in mind that the importation of 700,000 tons of US gas each year requires hundreds of large tankers entering the Forth every year. The carbon footprint of these gas tankers has been conservatively estimated at two million tonnes of CO2 a year, equivalent to the annual emissions of 417,000 cars, or the half-yearly emissions of a medium sized coal fired power station.  Hard to justify such carbon emissions when we have gas literally under our feet.

In 2013 Scottish politicians scrambled to settle the industrial dispute at Grangemouth.  All agreed that the future of Grangemouth must be secured.  And so it was.  It was shale gas that saved Grangemouth, saved jobs and ensured that Scotland’s last refinery would continue well into the future.  The Scottish Government has now determined that Scotland’s last refinery will not use gas recovered a stone’s throw away from its front gates.

At a time when North Sea oil jobs are in jeopardy, it is perverse that The Scottish Government appears to be putting politics above the real opportunity to throw Grangemouth refinery and the wider North Sea oil industry a local lifeline.