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Is the European Petrochemical Industry Really at Threat from Cheap Shale Imports?

In recent weeks the media has been full of stories of how the petrochemical industry in Europe is going to come under increased pressure due to competition from cheap imports of shale gas supplied by the United States.

In the meanwhile, the US petro/chemical industry looks set to experience a boom due to an increase in shale gas exports. Some analysts are predicting that the European petrochemical industry could face a decline because of the competition, while the United States looks set to thrive.

However, it could also be argued that there isn’t too much to be concerned about as the lower cost imports could in fact be an advantage to European- based companies.

As The Telegraph recently reported, cheap shale gas imports look to be the saviour of the Ineos owned Grangemouth plant in Scotland. Just weeks ago it looked as though the plant was about to close and thousands of jobs were to be lost. Nevertheless, with some rethinking of the current business model, bosses at Grangemouth say they have found a way to make the plant profitable.

Bosses at beleaguered plant are to make take advantage of the low prices of shale gas from the States. The article recently published in The Telegraph explains how using shale gas imported from the US has helped cut costs at the Scotland-based Grangemouth plant and will help it to become profitable again.

As Calum MacLean, Grangemouth chairman, explained to The Telegraph, the low cost of shale prices from the United States has allowed them to become more cost effective and means that the plant can produce ethylene competitively.

Grangemouth also intends to import ethane from the United States; this is something that will begin in 2016. The Telegraph reports that this will be the first time that shale has been “landed into Britain”. Even with the cost of importing, bosses say that the ethane will still be 50 per cent cheaper, allowing them to compete in the market where they struggled before.

Far from some assertions in the media that Europe could be a victim of low shale gas prices, it seems European businesses have found a way to make the reduced shale costs work for them. For instance, the BBC reports that the Rathnes plant in Norway – which is also owned by Ineos is using the same model as Grangemouth, and will buy gas at better prices in order to make its Norwegian plant profitable once more.

Some European companies may be wary of the challenges they could face from cheap shale imports, however, the examples from Grangemouth and Rathnes show how the cheap imports can be used to the best advantage

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