Jim Ratcliffe (INEOS) and, Francis Egan (Cuadrilla) BBC Radio 4, TODAY, 27 September 2016

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.

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]

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.