IGas signs £30m shale gas deal with Ineos to expand

Grangemouth petrochemical plant Image copyright Getty Images
Image caption The deal gives Ineos full ownership of the area around the Grangemouth petrochemical plant

UK shale firm IGas has signed a £30m gas deal with Switzerland's Ineos in a tie-up designed to expand IGas's exploration efforts.

The deal will give Ineos access to sites beyond the ones it currently operates in Scotland.

Ineos has also pledged an additional £138m to help IGas expand its shale gas operations in the North West and East Midlands regions in England.

Shares in IGas surged by more than 20% on news of the agreement.

Investors had worried about the strength of the firm, as the price of oil fell by more than half over the past year.

The deal also gives IGas another major partner. The UK onshore oil producer is already working with Total of France and GDF Suez.

"Alongside the commitment from our existing partners, Ineos's commitment of upfront cash and considerable capital investment will help fund us through the next steps of our shale appraisal and production programme," said Andrew Austin, chief executive of IGas, in a statement.

Scotland stake

Last year, Ineos said it planned to invest $1bn (£663m) in British shale gas exploration, in an effort to emulate the shale boom that has led to cheap oil prices in the US.

Ineos - which is privately owned - said that as part of this latest deal, it will acquire IGas's stake in the shale licence around the Grangemouth petrochemical plant, which will give the Swiss firm full ownership of the site.

Image copyright PA

Analysis: John Moylan, industry correspondent

Ineos needs shale gas.

It's the feed stock for its huge chemicals plants in Europe. Ineos is already investing £200m at Grangemouth in a vast storage facility to be able to import cheap gas from the US.

But it wants home grown shale gas too. And with this deal it has taken a big step forward in its aim to become the biggest shale gas player in Britain.

The deal gives it access to almost a quarter of a million acres of potential shale gas reserves. Ineos has also applied for more license blocks as part of the ongoing 14th onshore licensing round.

And to overcome objections to fracking it's offering local communities 6% of the revenues from the shale gas it produces - whenever that might be.

In a statement, Gary Haywood, the chief executive of Ineos Upstream, said: "This is a further significant step for Ineos in its plan to become the biggest player in the UK shale gas industry.

"We believe shale gas could revolutionise UK manufacturing and Ineos has the resources to make it happen, the skills to extract the gas safely, and the vision to realise that everyone must share in the rewards for UK shale gas to be successfully developed."

The plan to develop the Grangemouth site, however, is complicated by Scotland's current moratorium on fracking - the method Ineos would use to extract oil from the site.

Fracking, or hydraulic fracturing, involves pumping a mixture of water and chemicals into shale rock at high pressure to extract gas and oil.

Environmental campaigners claim the process encourages reliance on fossil fuels instead of promoting investment in renewable energy sources.

Proponents of the process say it unlocks huge deposits of oil and natural gas, increases a country's energy security and boosts the economies of the areas in which it takes place.

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