Jim Ratcliffe says fracking is vital to tackle high energy prices, and predicts it will turn villagers into millionaires
Jim Ratcliffe, founder of Ineos, says the UK is 'buying the most expensive electricity in Europe. Shale has the ability to change that'. Photograph: Ed Jones/AFP/Getty
Terry Macalister and Damian Carrington
The billionaire owner of Britain’s largest chemical company on Thursday unveiled plans to invest £640m in a bid to kick-start a shale gas revolution, which he claimed could make millionaires out of rural villagers.
Jim Ratcliffe, founder of Ineos, said he wanted to become the industry’s biggest player because fracking was vital to tackle high energy prices that were hurting consumers and killing manufacturing firms.
Ineos has never drilled wells before, but believes it can be successful because it has hired three experienced executives from the US shale boom to help unlock Britain’s potential as a producer.
“I don’t think the UK is in a great place for energy – nor for manufacturing … we are buying the most expensive electricity in Europe. Shale has the ability to change that,” said Ratcliffe at a presentation in London.
Ineos, which ran into controversy in 2010 by moving its tax domicile from Britain to Switzerland, has already acquired two exploration licences, but has applied for a range of others in Scotland and the north of England. It is hoping that an earlier offer to plough back 6% of all revenues into the local community will limit opposition and result in Ineos being rewarded with new exploration permits.
Ratcliffe believed the offer was generous and could be worth up to £400m to a site over 15 years. He said that some people in smaller towns and villages near to any new wells could become millionaires, adding: “I’m OK with that.”
But the company’s own survey commissioned from YouGov showed that even with the community incentive, only 43% of those polled in Scotland said they were in favour of shale extraction. The figure for the UK generally was more positive, with 50% in favour.
Ineos said wells had successfully been bored next to schools, churches and even close to the centre of large cities such as Fort Worth, Texas. “It is possible to drill wells in densely populated areas, but we don’t think that is necessary,” said Gary Haywood, the chief executive of Ineos UK.
The investment plans pleased the coalition government, which has been an enthusiastic cheerleader for the industry. Energy minister Matt Hancock said: “I am delighted to welcome the £640m Ineos investment in UK shale gas. [It is] a strong stride forward for this important domestic energy source and jobs.”
Tom Greatrex, Labour’s shadow energy minister, was also positive, although he warned that tough regulations must be in place to ensure safety and said shale was no “silver bullet” as presented by the coalition.
But there was widespread criticism from environmentalists. Simon Clydesdale, energy campaigner at Greenpeace UK, said investment was essential to transform the UK energy system, but not “giant speculative bets” on unproven and risky resources.
He added: “Ineos have jumped on a spin-powered bandwagon which is going nowhere. Independent academics recently called out government ministers over the ludicrous levels of hype around shale gas, saying ‘shale gas has been completely oversold’. It seems that Ineos have based their business plan on breathless PR brochures rather than scientific reports.”
Last week, even scientists from the UK Energy Research Centre told the BBC that promises of lower prices and greater energy security from UK shale gas were lacking in evidence.
“It is very frustrating to keep hearing that shale gas is going to solve our energy problems – there’s no evidence for that whatsoever, it’s hype,” said Prof Jim Watson, UKERC research director.
But the Ineos boss said Britain had relied unsuccessfully so far on coal, which he described as “the dirtiest way of making electricity”, nuclear, which needed “outrageous” subsidies, and wind farms, which “produce very little electricity”.
Manufacturing in Britain had collapsed over recent years due to the impact of high energy prices, he argued, warning that the huge Ineos petrochemical plant at Runcorn in Cheshire, which has 1,600 workers, would be closed eventually unless something was done to cut power bills.
“We are not going to survive long-term if we pay two times the amount for electricity as Germany … if businesses are not profitable, you have to shut them down,” said Ratcliffe. Last year he threatened to close the giant petrochemical plant at Grangemouth in Scotland in a row with the trade union movement over cost-cutting there.
But any Ineos shale drilling in Scotland will also likely run into opposition. There has been strong criticism of plans to develop the energy source there, with 26 community and environmental groups demanding a moratorium on exploration in Scotland. Opponents fear that fracking, which extracts gas and oil using high-pressure water and chemicals, could cause local pollution and earthquakes.
Richard Dixon, director of Friends of the Earth Scotland, said the Scottish government had taken a very cautious approach to fracking, unlike the UK government. “With much tougher planning rules, more ambitious climate targets and a review of both health issues and licensing under way, Scotland is the last place any company should apply to frack,” he said.
The British Geological Survey has estimated that the Midland valley in Scotland could contain about 80tn cubic feet of gas and 6bn barrels of oil. But it said: “The relatively complex geology and limited amount of good-quality constraining data result in a higher degree of uncertainty to resource estimation than [in England].” BGS said Scotland’s shale reserves were modest compared with England’s.
The prime minister, David Cameron, has said the government is “going all out for shale”, but development has been hit by small earthquakes in Lancashire, planning refusals in Sussex and controversy over legal changes allowing fracking under people’s homes without their permission.
This article was amended on 21 November 2014. An earlier version referred to 6tn barrels of oil where 6bn barrels of oil was meant. It was further amended on 24 November to clarify figures from the survey that Ineos commissioned from YouGov.