UK communities should be given a bigger share of the proceeds from shale gas exploration to help persuade them to back the new industry, the chairman of UK petrochemicals group Ineos said.
A total 6% of revenues from oil and gas wells should be given back, some 4% to landowners and 2% to local communities, Jim Ratcliffe said in a statement by Ineos Sunday.
This compares to a current plan by the UK shale gas industry to give 1% of the proceeds from production to local communities.
In the US, many landowners have received substantial payments from allowing companies to drill on their land, helping smooth the way for the industry to grow.
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But in the UK, mineral rights belong to the government, so landowners do not automatically profit if oil or gas is produced from their land.
Ratcliffe said in a statement: “We think this is a game changer for Britain. Giving 6% of the revenues to those living above our shale gas operations will give them a real stake in the success of the venture and encourage the development of the whole shale gas industry.”
Ineos says that an area of around 100 square kilometers with 200 wells could produce around GBP375 million ($609 million) in local benefits, some GBP250 million for home and landowners directly above the wells, and GBP125 million for schools, hospitals and parks to benefit the wider local community.
A single well, over its lifetime, could produce around GBP1.3 million for landowners and GBP600,000 for community projects.
Ineos aims to get involved in shale gas production itself and would be a key beneficiary of any UK shale gas boom, as it is a major user of gas in its petrochemicals production, as both a fuel and a feedstock.
The company has hired three experts from US company Mitchell Energy to bring in experience of fracking technology.
“We have now hired some of the world’s leading shale gas experts to further strengthen our sub-surface team,” Ineos said.
Ineos is already planning to build a new 60,000 cubic meter ethane import and storage terminal at its Grangemouth site in the UK to enable it to import US ethane by 2016, to take advantage of the US shale gas boom.
MOVE INTO EXPLORATION
Ineos earlier this year bought the rights to explore for shale gas in the area surrounding the company’s Grangemouth refinery complex on Scotland’s east coast.
Ineos Upstream, a new oil and gas exploration and production business that was set up in February, purchased 51% of the PEDL 133 license area, which covers 330 sq km in the Midland Valley, from BG Group for an undisclosed amount.
The remaining 49% of the PEDL 133 license area is owned by the operator, Dart Energy, which is being taken over by onshore explorer IGas Energy, with the deal expected to close October 1.
The UK’s Department of Energy and Climate Change Sunday said it was approving Ineos’ purchase of the 51% stake.
Business and Energy Minister Matthew Hancock said: “It’s very welcome news that Ineos wants to explore for shale gas.”
“It’s a real vote of confidence that Ineos recognize the potential of shale gas to transform local communities, create jobs and new economic opportunities; providing a cleaner, greener domestic energy resource.”
Despite great interest in UK shale, there has been only limited exploration drilling to date, and only one company, Cuadrilla Resources, has carried out fracking tests.
Those tests, in 2011, were followed by a moratorium on fracking over earthquake concerns.
The moratorium was lifted at the end of 2012, but tests have not yet resumed.
The UK government is currently accepting applications for new onshore exploration licenses, with an October 28 deadline, and awards are expected next year.
The 14th landward licensing round, which was opened July 28, is expected to be popular with potential shale oil and gas explorers.