INEOS sign new deal to supply ethane from imported US shale gas from Grangemouth to Exxon – Shell ethylene plant in Fife

US shale gas imports will protect jobs at the Exxon-Shell ethylene plant at Mossmorran, Fife
US shale gas imports will protect jobs at the Exxon-Shell ethylene plant at Mossmorran, Fife

INEOS, Exxon Mobil and Shell have today announced a long-term sale and purchase agreement to secure ethane from US shale gas for the Fife Ethylene Plant (FEP) at Mossmorran in Scotland, from mid 2017.

The Fife plant  – which is jointly owned and operated by Exxon and Shell – will receive ethane from INEOS’ new import terminal in Grangemouth, Scotland.

Access to this new source of feedstock will help complement dwindling supplies from North Sea natural gas fields. The agreement will also ensure the competitiveness of a major manufacturing facility in Scotland and help secure skilled jobs in the long run.

The Fife Ethylene Plant is one of Europe’s largest and most modern ethylene facilities. The plant started production in 1985, and is one of only four natural gas-fed steam crackers in Europe.

It was the first plant specifically designed to use natural gas liquids from the North Sea as feedstock. Alongside INEOS Grangemouth, it supplies manufacturing in Scotland, the rest of the UK and export markets with ethylene. It has an annual capacity of 830,000 tonnes of ethylene.

Ethane gas is a vital raw material needed to produce ethylene, which itself is used in the manufacture of a broad range of products across the UK and is exported to Europe and other world markets. Access to ethane from shale production will provide sufficient raw material to run UK steamcrackers to make ethylene at full operating rates.

Geir Tuft Business Director at INEOS O&P 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.”

 “Today’s agreement helps to secure additional feedstock for the Fife plant,” said Karen McKee, vice-president of ExxonMobil’s global basic chemicals business.  

And Elise Nowee, General Manager Base Chemicals Europe, Shell Chemicals, commented: “This agreement gives Fife 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 committed £450 million to construct the new ethane import terminal at its Grangemouth facility. It represents the most significant investment in UK petrochemical manufacturing in recent times and is supported by both the UK and Scottish governments. An existing pipeline will transport the gas from Grangemouth to Fife.

The importance of low energy costs in manufacturing is also being highlighted – in part –  by the loss of nearly 2,000 jobs in steel-making in Scotland and Teesside with the closure of Tata plants.

Britain’s steel industry has been battered by falling prices, high energy costs, cheap imports and the strength of the pound, which has made exports expensive.

The sector has been hit by the closure of the Redcar steel plant on Teesside with the loss of 2,200 jobs, Caparo industries going into administration and the mothballing of Tata Steel mills in Scunthorpe and Scotland with 1,200 redundancies.

Harish Patel, national officer at the Unite union, said: “The UK business secretary needs to secure urgent action from EU to tackle the dumping of cheap Chinese steel and high energy costs.”

A number carbon levies or green taxes in the UK – notably the renewables obligation and carbon price floor – contribute significantly to UK energy costs being up to 50% higher than the costs for equivalent plants (ie integrated steelmaking sites) in northern continental Europe.

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