If you wanted to get a first hand feel of nascent efforts aimed at stepping up European energy security and the old continent’s reluctant, some would say borderline sluggish, pullback from reliance on Russian gas, perhaps the US states of Pennsylvania and Ohio would not be high on your list.
But think again; for if you headed roughly 80 miles southwest of Pittsburgh airport, first along the US 22W crossing a tiny stretch of West Virginia onto OH-7 S/Ohio River Scenic Byway (a name befitting the highway with stunning views), drive past Bellaire, Glen Dale, Moundsville, Powhatan Point and turn right on Kerbs Ridge Road, you’ll soon find yourself in Switzerland Township, Ohio – and there you’ll spot them – a good few shale gas drilling rigs in quick succession.
Interspersed with stunning scenery and pastures, these wells are destined to dispatch a whole lot of cargo to Europe from the Marcellus Shale, with the supply chain wheels having been set in motion by serial British industrialist Jim Ratcliffe’s chemicals company Ineos and regional partner Consol Energy.
Shale gas drilling site in Switzerland Township, Ohio, USA © Mark Simpson, September 2016
The latter company, which is fast diversifying away from its coal heritage, has surplus natural gas which Ineos reckons Europe and Asia could well do with, not least the company’s own chemical manufacturing plants. Not one to take measures by half, Ratcliffe has pumped $2bn of his company’s money along with Evergas, into commissioning eight Dragon class ships with each capable of carrying over 27,500 cubic meters of liquefied ethane at -90°C.
For Consol it would mean dispatching the gas from one of its many fields, including one high yielding pad on Pittsburgh Airport-owned land, via the Mariner East pipeline to the Marcus Hook gas terminal near Philadelphia, from where Ineos’ many dragons of the oceans will ferry the cargo away to distant lands.
Tom Crotty, a Director at Ineos, wont reveal the pricing mechanism and the long-term nature of the contracts, but hastens to add the company has “signed several”.
Consol Energy, is by no means is the only supplier for Ineos. Houston-based Enterprise Products Partners, builder of the world’s largest ethane export terminal in Morgan’s Point is another natural partner, with EPP’s first cargo already having been dispatched to Norway, while deliveries to the UK are imminent.
For the likes of Consol Energy and EPP, the logic is straightforward - getting more bang for your buck via overseas sales. Admittedly, the Henry Hub Natural Gas futures price has risen in recent weeks to above $3 per million Btu (at the time of writing this article). However, little over three years ago, we saw sub-$2 prices stateside, and exporting seems to come naturally to US producers eyeing exports to Europe and Asia for better returns.
Yet, for Ineos, the approach serves more than one purpose. It currently holds 30 UK shale gas exploration licenses that grant it access to 1 million acres of potential exploration land, making it a sizeable player in the nascent British market.
Primarily, competitively priced natural gas imported from a reliable suppliers like Consol Energy and EPP, ensure feedstock for its chemicals business. Crotty says Ineos would move over 40,000 barrels oil equivalent of gas per day, every day of the year, for next fifteen years, via its Dragon ships from the US to Europe.
“The imported gas will keep our businesses competitive and guarantee forward investment and jobs.”
However, shale gas imports from the US, the company hopes, are also likely to influence public opinion in the UK via an apt demonstration of the low carbon nature and transformational impact it has had on US manufacturing, according to Crotty.
Furthermore, the Ineos director insisted that with the UK tipped to import 69% of its natural gas needs by 2018-19, the company's bid to pump shale gas was as much about British energy security as it was about ensuring cheaper feedstock and improving the local economy.
While Ineos did not offer an opinion, the company probably hopes once the British public sees shale gas imported from overseas being put to use closer to home, acceptance of fracking would grow.
Meanwhile the company is going full-steam ahead, having recently signed up the coveted Mitchell Energy engineering trio of Nick Steinsbeger, Dan Steward and Kent Bowker, who worked directly at one point with the late natural gas baron George P. Mitchell often dubbed the "father of fracking."
Shale has plenty of opponents, not least because financial rewards in the UK are unlikely to be anything like the US, where landowners own mineral rights to what is under their property. To soothe over things, Ineos has pledged to give 6% of its shale gas revenues to “homeowners, landowners and communities close to its wells”; a potential “£2.5bn ($3.26bn) giveaway,” according to Crotty.
The company is also engaging with local and national politicians, community stakeholders, insists it is in it for the long haul and is prepared for the challenges British geology and legislative constraints might pose to its drilling programme and ultimate objective of establishing the UK shale gas industry. That only time will tell, but for now, the UK is gearing up to receive its first gas consignment sourced from the Marcellus shale.
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