Ineos strikes deal to supply Fife plant with gas from US

Chemicals giant Ineos has signed a major deal with Exxon Mobil and Shell to supply ethane from US shale gas production, in a move it said would boost Scottish manufacturing.

The Ineos Grangemouth refinery. Picture: PA

Under the agreement, Ineos will supply the ethane to the Fife Ethylene Plant (FEP) from 2017 via its new £450 million import terminal at Grangemouth.

The firm said the new source of ethane would complement supplies from North Sea natural gas fields, boost competitiveness of the plant and help secure skilled jobs “in the long run”.

Sign up to our daily newsletter

The i newsletter cut through the noise

Ethane gas is a raw material needed to produce ethylene, which is used in the manufacture of a range of products across the UK and is also exported to Europe and other world markets.

Traditionally, Grangemouth has relied heavily on ethane gas from the North Sea, but those supplies are dwindling.

The Fife Ethylene Plant, at Mosmorran, is owned and run by Exxon Mobil, with Shell holding 50 per cent capacity rights. The plant is one of Europe’s largest ethylene facilities, with an annual capacity of 830,000 tonnes.

Geir Tuft, business director at Ineos Olefins & Polymers UK, said: “This is a landmark agreement for everyone involved. We know that ethane from US shale gas has transformed US manufacturing and we are now seeing this advantage being shared across Scotland.”

Elise Nowee, from Shell Chemicals, said: “This agreement gives FEP access to the new infrastructure developed by Ineos and in so doing brings US-advantaged ethane to FEP. The agreement will help us to meet the long-term needs of our ethylene customers.”

Ineos has described the new ethane import terminal at its Grangemouth facility as “the most significant investment in UK petrochemical manufacturing in recent times”.

Karen McKee, vice-president of ExxonMobil’s global basic chemicals business, also hailed the agreement for securing additional raw material supplies for the Fife plant.

An existing pipeline will transport the gas from Grangemouth to the FEP, which began production in 1985 and is one of Europe’s largest and most modern ethylene facilities.

It was the first plant specifically designed to use natural gas liquids from the North Sea as feedstock. Alongside Ineos Grangemouth, it supplies a number of manufacturers in Scotland, the rest of the UK and export markets.

Ineos secured £230m in loan guarantees from the UK government in 2013 by way of a public bond to fund construction of the ethane storage tank at Grangemouth.

The backing, which also included £9m of grant funding support from the Scottish Government, was agreed as part of a deal to end an industrial dispute after the company threatened to close the Grangemouth plant.

Last month, Ineos increased its ownership of North Sea gas fields after purchasing a further 25 per cent interest in the Clipper South area.