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UK runs risk of losing petrochemical industry

24 Jul '14
2 min read

If the UK does not develop its shale resources in a timely fashion, it runs a serious risk of losing the energy intensive and petrochemical industries which depend on competitively-priced energy and raw materials and which employ around 250,000 people, says the report on Session 2013-14 of the Economic Affairs Committee, House of Lords.
 
The report titled ‘The Economic Impact on UK Energy Policy of Shale Gas and Oil’, says that investment is rising fast in energy intensive industries and petrochemicals in the US, since cheap shale gas makes “reshoring” of overseas plants economic.
 
The report quotes Mr. Tom Crotty of INEOS, who says that the cost of energy in the UK is three times that in the US and the Middle East—the two major competitors for the manufacture of petrochemicals.
 
In such a scenario, development of shale gas in the UK on a significant scale could provide substantial benefits, including reduced costs for energy intensive businesses and the petrochemicals sector that also use gas as a feedstock, states the report.
 
Falling energy prices due to development of shale resources in the US is encouraging the repatriation (or “reshoring”) of energy intensive businesses, including petrochemicals. Mr. Tom Crotty of INEOS said “There has been no new investment in the petrochemical industry in the United States for 25 years. There are now 11 major facilities under construction and another seven in the planning phase.”
 
 European firms are also reported to be moving production to the US, the report mentions.
 
The low gas prices in the US had led to an investment boom in energy-intensive and petrochemical industries, which presents “a serious long-term competitive threat”. As a result, at the moment, there are no new investments in any energy-intensive industries in Europe. Even INEOS plans to use imported US shale-derived feedstock in their chemical plants at Grangemouth.
 
Indigenous shale gas could provide competitively priced fuel and feedstock that energy intensive industry in the UK needs in the longer term. Substantial shale gas production in the UK could help retain and develop energy intensive industries and provide feedstock to petrochemical plants. If however there is no prospect that the UK’s shale gas resource will be developed within a reasonable timescale, energy intensive industry is likely to move elsewhere, the report states.
 

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