Sir Jim Ratcliffe: energy investors favour US over Europe

LBS alumnus is investing billions in a new European petrochemical complex, despite the region’s drawbacks

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Sir Jim Ratcliffe has admitted to thinking long and hard about spending €2.7 billion (£2.4 billion) on building a new petrochemical complex in Europe, because of the region’s high energy prices and stagnant economy. 

The founder and chairman of petrochemicals company Ineos believes investors are generally more interested in the US, where gas prices are a third of those in the UK and Germany. 

“This is the only big energy investment in Europe for 30 years,” he said when discussing Ineos’ plan to develop an ethane gas processing plant somewhere in northwest Europe. He was speaking at ‘Fireside Chat with Sir Jim Ratcliffe’, hosted by London Business School’s (LBS) Alumni Energy Club. 

“You have to think quite hard about investing in this region, even though it’s a big market.”

Ratcliffe, an MBA graduate from LBS, added that building the plant in the UK was never an option because of the logistical challenges of transporting its products overseas to neighbouring countries. However, Europe was too large a market for Ineos to ignore. 

The unveiling of Ineos’ European investment comes shortly after the company secured permission to dig the first shale gas exploration well in Derbyshire, despite strong local opposition. Ineos plans to drill down 2,400 metres and extract shale rock samples to assess the level of gas trapped within them. 

If satisfied with the results from those tests, Ineos could then seek permission to start fracking – pumping water, sand and chemicals down a well at high pressure to fracture rocks and release the gas from them.   

UK energy demands
Shale gas and nuclear plants are viable options to meet the UK’s energy demands, according to Ratcliffe. However, environmentalists claim that fracking can lead to air or water pollution and cause minor earthquakes.

Ratcliffe points to the US, where the one million shale gas wells dug in the past 15 years have brought down the nation’s energy costs and boosted the economy of several states. “Shale gas has had an immense impact,” Ratcliffe said. “If you go to Pittsburgh and compare it to 25 years ago, when it was an old steel town, it’s now full of new cars and buildings, and people with smiles on their faces.

“In seven years, the Marcellus Shale (America’s largest natural gas field) went from nothing to producing 16–18 billion cubic feet of gas per annum. The UK’s gas consumption is eight billion cubic feet in the same period, so one shale gas site can produce more than two times what we need.”

Addressing environmental concerns about how shale gas is extracted, Ratcliffe said companies in the US – home to one of the world’s most regulated energy sectors – had found a safe way to do it. 

“I don’t understand why there’s so much opposition in the UK,” he said. “We’re running out of gas, coal production is closing down by 2025 and wind is an act of God. Some shale gas wells and nuclear power stations would help address all that.”

In May 2018, Ratcliffe topped the Sunday Times Rich List after amassing a £21.05 billion personal fortune. Since founding Ineos in 1998, he has built the company into a global enterprise with an annual turnover of £45 billion and 18,500 employees at 181 sites across 22 countries.

Read more about how Ratcliffe built Ineos from scratch.