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Ineos buys into second Scottish shale licence

The licence is in Scotland's Midland Valley, but the company has yet to start drilling

Ineos has bought into its second shale gas licence in Scotland’s Midland Valley, but the company needs to start drilling to get a better idea of how much oil and gas could be extracted from the acreage.

On 13 October, the petrochemical company said it bought an 80% stake in Aberdeen-based Reach Coal Seam Gas (Reach CSG), which has rights to explore for shale gas. Under the deal, Ineos will acquire Petroleum Exploration and Development Licence (PEDL) 162, which was awarded to Reach CSG in 2008. Reach has carried out some appraisal work on the licence.

Gary Haywood, chief executive of Ineos Upstream, said the company wants to evaluate the licence’s resource potential and determine if oil and gas can be economically produced.

As part of the deal, Ineos will act as operator for PEDL 162 and will also fund initial appraisal activity, consisting of two vertical wells and a  3-D seismic survey, covering 100 square kms of the 400 square km licence area.

The licence is next to PEDL 133, which Ineos partly farmed into when it bought a 51% stake from BG Group in August. The remaining 49% stake in PEDL 133 is held by Dart Energy, which is also the operator.

The Reach CSG deal is subject to relevant regulatory approvals, with completion expected by mid-November. Both licences are near the company’s Grangemouth oil refinery and petrochemicals complex, the company’s largest manufacturing site by volume.

Ineos is building facilities to import ethane extracted from US shale gas into Grangemouth, allowing it to take advantage of lower-priced US gas for petrochemicals feedstock. Ineos also hopes to use any eventual UK shale-gas production both as a fuel to generate the electricity used by Grangemouth, and petrochemicals feedstock.

In September Ineos outlined plans to pay local communities 6% of revenues from future shale-gas production

Scotland's Midland Valley lies along the country's Central Belt, running from Girvan to Greenock in the west, and Dunbar to Stonehaven in the east.

A recent survey carried out by the British Geological Survey (BGS) said the Midland Valley could hold between 49.4 trillion cubic feet (cf) and 134.6 trillion cf of shale gas, giving a mid-range estimate for the resource of 80.3 trillion cf.

However the BGS survey included the caveat that an accurate estimate of the area’s potential recoverable resource is difficult because of complex geology and limited available good-quality data. 

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