Today's TODAY was a veritable love-fest of oil and gas tycoons:
Mike Tholen of Oil and Gas UK, Jim Ratcliffe of INEOS, and Francis Egan of Cuadrilla.
Mike Tholen of Oil and Gas UK, Jim Ratcliffe of INEOS, and Francis Egan of Cuadrilla.
US
shale gas extracted by fracking will be imported for the first time today. The
gas is being brought into Grangemouth by the chemical giant INEOS. The firm is
publicly opposed to the Scottish government's moratorium on fracking, a process
by which water sand and chemicals are pumped at high pressure into shale rock
to release gas. Here's our Scotland editor Sarah Smith: "A specially constructed ship emblazoned
with the slogan 'shale gas for progress'
in huge letters will make its way up the Firth of Forth complete with a piper
playing on the prow. Environmental protestors will greet the ship. They believe
fracking can cause environmental damage and even earthquakes. The INEOS founder
Jim Ratcliffe insists a decline in North Sea gas production means he needs to
import American shale gas to keep his plant open and sustain 10,000 jobs. He
wants to start fracking for shale gas in the UK. "
Mike Tholen, upstream policy director of Oil and Gas
UK.
Dominic
O'Connell (business editor of the Sunday Times, see furore over his appointment
here: https://www.theguardian.com/media/2016/may/02/bbc-nuj-today-business-presenter-dominic-oconnell-sunday-times-external-applicant)
reports: "The first shipment of US shale gas arrives in the UK today but
at the same time the number of jobs in the North Sea, our own offshore oil and
gas industry has fallen by a quarter in the last two years. That's one of the
rather sobering findings from the annual economic report from Oil and Gas UK.
Costs are down, earnings in the supply chain have fallen by about a third, but
so has investment in new wells. Joining me is Mike Tholen who is the upstream
policy director from Oil and Gas UK. Mike, it's a quarter of jobs lost. How
many is that in numbers?
Mike
Tholen: Looking across the sector as a whole, just on 100,000 jobs have been
lost from those working in the oil and gas industry and those supporting the
industry.
Dominic
O'Connell: And is production overall in decline, or are the oil fields still
pumping out enough to maintain production?
Mike
Tholen: The good news is we've actually seen production increase this year and
that follows last year where it went up 10%, so turning a corner on production.
Dominic
O'Connell: But the long term picture is not good because we're producing more
out of old wells, but we're not
replacing the reserves.
Mike
Tholen: Yeah, one of our challenges is replacing wells, replacing production
and so our need is to drive more focus on exploration to be able to improve
that activity.
Dominic
O'Connell: What's the rate of depletion? What's the deficit in terms of new
exploration?
Mike
Tholen: Well typically at the minute last year we discovered a quarter of the
amount of oil and gas than we produced and clearly we need change that to be
able to improve the outlook for the North Sea.
Dominic
O'Connell: The government has played around with tax breaks for the North Sea
and so forth but really this is just
about the oil price, isn't it?
Mike
Tholen: It comes down a lot to the competitiveness of the North Sea and indeed
the tax regime has a part to play. What we're seeing is that the industry as
you say cut its costs by nearly half [by cutting 100,000 jobs?]and that's done
a lot to improve its attractiveness to investors. The challenge is to get that
investment to come in a very difficult climate globally.
Dominic
O'Connell: But what's the break-even price for the North Sea, even at these
depressed costs of production?
Mike
Tholen: It varies by field by field, but certainly many many companies now have
got their fields so they act as a cash generative even in the current low oil
prices.
Dominic
O'Connell: Do you think tax breaks are the answer or really should the
government just leave the industry alone for a bit?
Mike
Tholen: I think leaving the tax regime
alone is part of the answer and they've committed to do that. What we also need
to do though is work with the government to promote success of the industry. We
are there along automotive and aerospace as one of the great technological
successes of the north, of the UK.
Dominic
O'Connell: We'll be hearing more about US shale gas arriving later today. Thank
you very much for the moment Mike Tholen, upstream policy director of Oil and
Gas UK.
A tanker is to dock at Grangemouth in central
Scotland today bringing the first shipment of American shale gas extracted by
fracking. The importer INEOS says shale gas will replace dwindling North Sea
supplies, but environmental groups say the company will use the shipment to press the Scottish government to lift its
moratorium on fracking.
Jim
Ratcliffe, founder and chief of INEOS
US shale
gas extracted by fracking will be imported for the first time today. The gas
will arrive to a fanfair into the port of Grangemouth brought in by the
chemical giant INEOS. The firm is publicly opposed to the Scottish government's
moratorium on fracking, a process by which water sand and chemicals are pumped
at high pressure into shale rock to release gas. Here's our Scotland editor
Sarah Smith: "A specially
constructed ship emblazoned with the slogan
'shale gas for progress' in huge letters will make its way up the Firth
of Forth complete with a piper playing on the prow. Environmental protestors
will greet the ship. They believe fracking can cause environmental damage and
even earthquakes. The INEOS founder Jim Ratcliffe insists a decline in North
Sea gas production means he needs to import American shale gas to keep his
plant open and sustain 10,000 jobs. He wants to start fracking for shale gas in
the UK. His firm has been granted
licences to start exploratory drilling in England, but the Scottish government
has imposed a moratorium on fracking in Scotland until it can be proven there
is no damage to health or to the environment." The first shipment of US
Shale gas arrives in Britain this morning, a big moment, particularly for the
company that brought it here. Dominic
O'Connell has more on that now. Dominic.
Dominic
O'Connell: Thanks Michal. Cheap shale gas, and it is cheap, has given the US
economy quite a boost and now it's here. A company called INEOS, which is one
of the world's largest chemical companies, and one of Britain's largest private
companies, you can't buy its shares on the stockmarket, has built a fleet of
ships to bring to its giant Grangemouth chemicals plant in Scotland. Jim
Ratcliffe is the man responsible, he is INEOS's founder and Chief and he joins
me from Grangemouth. Jim, why are you bringing the gas here in the first place?
Jim
Ratcliffe: I think that's simple really. Grangemouth is obviously a very large
chemical complex up here in Scotland. It's the largest chemical site in the UK
and it's always depended upon the North Sea for its raw materials and the North
Sea, you know, is (pause) in its sunset years and was not producing sufficient
raw materials for Grangemouth to continue operation.
Dominic
O'Connell: So you haven't been able to run Grangemouth flat out for how long?
Jim
Ratcliffe: It's seven or eight years. It's sort of limped along. Three years
ago really we reached a crisis point where we had to make a decision whether to
switch it off or not. But three years ago the various parties involved in
Grangemouth agreed that we should ship the shale gas across from America to
rescue the facility and the first shipment arrives today.
Dominic
O'Connell: And how much cheaper is it Jim? Could you give people an idea of how
much you pay for gas in the US and how much you pay in Europe?
Jim
Ratcliffe: Well, it varies obviously, depending upon circumstances and the
price of oil affects that. But certainly when the project kicked off three
years ago price of gas in America was a third that of the UK, so America was
immensely more competitive than the UK and Europe for that matter, so the whole
of European chemicals was under threat at that stage. Oil having dropped to $50
that sort of reduced somewhat, but still it's much much cheaper in America than
it is over here.
Dominic
O'Connell: And it's worth pointing
out people might think that you're using
this gas to generate electricity, or to heat something, which is what most
people use gas for . You're actually using it to make chemical products, aren't
you?
Jim
Ratcliffe: Yeah. I mean, when it comes out of the ground it's sort of a mix,
you know, shale gas is a mixture of gases. It's mainly the gas that we
recognise, we call it 'natural gas' as it sort of heats the home and runs the
cooker, but it also comes up with a few other gases - things we call ethane
propane butane calor gas type things and they can be used either as a fuel or
raw material for chemicals. That's what we make plastics and antifreeze and
lubricants and so forth and things like that from.
Dominic
O'Connell: There's a certain irony here that you're bringing shale gas from
America here the day after the Labour party conference says it wants to ban
fracking and of course there is a ban (no,it's a moratorium) on fracking for
shale gas in Scotland. There is a certain amount of irony about that, isn't
there?
Jim
Ratcliffe: Yes there is. Well it's difficult for me to understand really.
Dominic
O'Connell: Because you want to do a lot
of fracking here in the UK and you've invested a lot of money in this, haven't
you.
Jim
Ratcliffe: Yeah. That's correct. Yes, I think it's been fairly well proven now
in America where they've now drilled a million shale gas wells. It's had an
immense impact on the US economy and whilst in the early days, as there is in
any exploratory industry, you know, there are a few issues in the early days,
it's now settled down and there haven't been safety issues and environmental
issues in America. It's extremely well regulated over there. We're not talking
about a hundred wells or ten wells or a thousand wells. We're talking about a
million shale gas wells in America they've been doing it for many, many years
and it's been extremely, I mean, one shale alone in America which is where the
gas coming to Grangemouth is coming from, called Marcellus, is now producing 3x the total UK consumption of
gas from one shale, and there are probably 50 shales in America. And obviously the UK is sat on just as many
shales, you know.
[One of the companies supplying INEOS' gas, Range Resources, was fined more than $4m (£3.1m) for allowing liquid from its wells to pollute groundwater and soil in Bradford County Pennsylvania in 2014 – the largest penalty ever imposed for an environmental offence by the state. In 2015, the DEP sought to fine Range Resources $8.9m for a shalegas well that had been leaking since 2011 in Lycoming County]
[One of the companies supplying INEOS' gas, Range Resources, was fined more than $4m (£3.1m) for allowing liquid from its wells to pollute groundwater and soil in Bradford County Pennsylvania in 2014 – the largest penalty ever imposed for an environmental offence by the state. In 2015, the DEP sought to fine Range Resources $8.9m for a shalegas well that had been leaking since 2011 in Lycoming County]
Dominic
O'Connell: I was going to ask, from the work you've done on evaluating the UK shale potential, could we have cheap
gas like they have in America?
Jim
Ratcliffe: Yeah, if you think about the UK there's lots of hydrocarbons around.
You know we've got lots of coal, we've got North Sea oil and gas, so we're sat
in a pocket of hydrocarbons anyway. There's lots of preliminary data that show
that we're sat on a lot of shales in South Yorkshire, North Yorkshire, various
parts of Lancashire, up in Scotland. Yeah, there's lots of shale around and you
know from the evidence we have today the quantities of gas are enormous in the
UK. If you look at the impact it's had in the United States, if you look at
Pittsburg, which was an old steel town, decaying, 10,15 years ago, it
absolutely transformed a place like
Pittsburg, and there are many similar places in the UK. You know the industrial
heartland of the UK some of it is not in good shape. It has got this ability to
transform peoples' lives, jobs, investment as it has in America.
Dominic
O'Connell: Just looking at the wider
INEOS picture. You moved the company to Switzerland a few years ago. You coming
back onshore?
Jim
Ratcliffe: We're already back onshore.
Dominic
O'Connell: Ah, very good. Did the Brexit vote have anything to do with that?
Jim
Ratcliffe: No. No, I don’t, no, it was largely because an awful lot of things
in our business were happening in the UK, not in the least of which was shale,
our investment in Grangemouth, and what have you, so the centre of gravity of
INEOS has moved back to the UK.
Dominic
O'Connell: Jim Ratcliffe of INEOS. Thank you very much.
Francis Egan of Cuadrilla
Michal
Husain: Today's arrival in the UK of a first shipment of American shale gas
[Note: INEOS shipment is ethane, to be used in industrial processes, not
heating homes or producing electricity] comes just after Labour announced that
in government, it would ban fracking altogether. The technique isn't being used
in the UK at the moment though an application from one company to frack at a
site in Yorkshire was approved by the local council in May.
Labour's
approach was outlined here by Barry Gardiner, the Shadow Secretary of State for
Energy and Climate Change who's with me here and Francis Egan is in our Salford
studio. He's chief executive of the energy company Cuadrilla, which specialises
in fracking. Good morning to you both.
Michal
Husain: Barry Gardiner, your previous
position was a moratorium on fracking until you could be sure it was safe. What
changed?
Barry
Gardiner: "Quite simply quite
simply what we said was that we wanted to see if we could overcome the
technical problems that exist with fracking, which produce real environmental
dangers: water table problems; problems in terms of leakage. But they are
technical problems and it's very clear that they may be able to be overcome.
But there's a much more principled objection really and that is that shale gas
is simply an expensive and dirty detour on the road to the clean, low carbon
energy future infrastructure that we need and that's why we're now saying,
given all that's happened with China and with the USA over the past couple of
weeks in terms of ratification of the Paris treaty, the move now is very much
forward, it's looking to a low carbon future and we don't want to get locked
into an energy infrastructure that looks to the past.
Michal
Husain: So it's really a point of principle then, isn't it, rather than
evidence coming forward, that made you think that a moratorium wasn't the right
approach and instead there should be a ban on fracking.
Barry
Gardiner: You're right as point of principle but it's also a point of
economics. Because what is needed at the moment is a clear signal about the
direction that our country is going.
Investors need that signal if they're going to invest and what we want
them to do is invest in low carbon technologies of the future, not in the
fossil fuel technologies of the past.
Michal
Husain: Francis Egan of Cuadrilla. Why would we need more fossil fuels; more
hydrocarbons in our energy mix?
Francis
Egan: Well it was interesting to listen to Barry talk about China and the USA.
They’re about to sign a treaty, which of course is true in ???????. But in fact both of those countries are
enthusiastically embracing fracking - the US and China. In fact BP signed a
large agreement with China to help it develop its shale resources just a matter
of weeks ago. And it's not that we say that
this is the only way. We're supportive of the new rules, but the fact
remains that two out of three people, probably more, use gas to heat their
homes and cook and you cannot change that overnight. To make a policy decision
that says we are going to ignore, even at an exploration stage, our own
resource and carry on importing it from as far away as the US is frankly
ridiculous. [Note - INEOS is importing ethane to Grangemouth which will be used
in industrial processes, not heating homes or producing electricity.]
Michal
Husain: Barry Gardiner that's exactly what is happening this morning with this
first shipment being brought into Grangemouth by INEOS. [Note - INEOS is
importing ethane to Grangemouth which will be used in industrial processes, not
heating homes or producing electricity.] The GMB Union has been very angry at
what you've had to say about a ban on fracking,
saying "We will need gas to heat our homes and our power industry.
Where are we going to go to get it?" They say we are increasingly going to
be dependent on regimes fronted by "hangmen, henchmen and
head-choppers" for our energy.
Barry
Gardiner: 62% of our gas that we
imported last year actually comes from Norway. I don't know if they're calling
them "henchmen, hangmen and head-choppers" but the truth is that most
of our gas last year came from Norway. We will need gas in the future, really
through to 2030, but by then, if you look at the latest Cambridge econometrics
report, they're saying that there'll probably be 25% reduction in our need for
gas.
Michal
Husain: Fracking in this country could be a way to make us more self-sufficient
and to have jobs here and what you would do would prevent that happening.
Barry
Gardiner: No, not at all. Because actually you made the point earlier about
ensuring that we get the jobs and growth that we need. That jobs and growth is clean growth and by 2030 we will need to be
moving to 40 to 60 grammes [?] per kilowatt hours our power supply. Gas doesn't
do that I'm afraid. We need to get the signals into the market now to create
the clean jobs. GMB were talking about 64,000 jobs. I'm talking about 300,000
jobs.
Michal
Husain: Francis Egan, given what Jim of INEOS told us a little earlier on the
programme, two things: one, was that he believes the UK is sat on as much shale
as the US, but given that these imports are coming in now, would you, if you
were able to frack for shale gas in this country, would you be able to compete
with those cheaper American imports, because it is cheaper to get shale gas out
of the US than it is here.
Francis
Egan: Well of course we would. That's why we're in the business. If we can't
develop gas literally a hundred metres from a pipeline in the UK cheaper for
the end consumer than you can extract it in the US, ship it 3,000 miles across
the Atlantic, turn it back from a liquid into a gas, then we shouldn't be in
business. That's our basic business model. I would challenge Barry if he
seriously thinks we won't be using gas in this country beyond 2030, he is sadly
deluded and gas is used a lot more for electricity.
Barry
Gardiner: I didn't say that as you know. I quoted the [Cambridge] econometrics
report that said we'll be using 25% less gas.
Francis
Egan: So we'll be using 75% of the gas in 2030 that we are today which is a
huge volume of gas and we'll be importing all of it.
Michal
Husain: This is a huge debate which unfortunately we'll have to leave where it
is.
Francis
Egan of Cuadrilla and Barry Gardiner [Shadow Secretary for Energy and Climate
Change], thank you very much.