Lost in translation

Ineos boss Jim Ratcliffe really set the cat among the pigeons this week with his promise to give 6% of his company’s revenues from potential UK shale operations back to the landowners and communities affected by its activities.

No sooner had Ratcliffe made the announcement than one of his rivals – IGas chief executive Andrew Austin – questioned whether this move could be harmful to the (albeit very low) level of trust between the British public and the shale oil and gas industry.

“The more people are given money, the more people think there is a reason that they need to be compensated,” said Austin, speaking at the European Shale Gas and Oil Summit (ESGOS) in London on Monday.

“We already have 100% business rates retention, which equals 3% of our revenues going straight through to the councils. There are a number of ways (to support communities) and some are more eye-catching than others, but I think we need a more balanced approach.”

Ratcliffe had better hope that his recipe for success, borrowed from the US, isn’t lost in translation

One can’t help but think that Austin and Ineos’ other rivals in the shale licensing round that closes this month are smarting from Ratcliffe’s proposal. In addition to local authorities’ retention of business rates acquired from shale sites, the industry had already agreed with the government to pay £20,000 per well to local communities.

Given that production costs of shale are likely to be far higher in the UK than the US, adding 6% of revenues to these already agreed payments could potentially affect the economic viability of some sites.

Ratcliffe has based Ineos’ proposal on the best practice approach of developers in the US – but the UK is a very different country in many ways when it comes to shale: not only is UK shale gas stored in far more complex geological formations, but we also tend to be a far more cynical bunch.

Stephen Fry once observed that the phrase “only in America” is one of wonder at the things that can be accomplished in that nation, while the phrase “only in Britain” is one generally uttered in frustration at one kind of incompetency or another.

So it seems that the American language of money can be translated very differently here: rather than being welcomed with open arms, some such as Austin believe big payments could ramp up the levels of distrust of the industry that already exist.

Speaking at ESGOS yesterday, Chorley Council head of planning Jennifer Moore said: “When I hear 6% revenue stream, most members of the communities I serve will smell a rat. They will be suspicious.”

Ratcliffe described Ineos’ proposal on Monday as “a game changer for Britain”. He had better hope that his recipe for success, borrowed from the US, isn’t lost in translation.