INEOS AND OUR VISION FOR SHALE GAS

INEOS is one of the UK’s largest manufacturing businesses. It employs 4000 people in the UK across 7 sites. It can use shale gas at its manufacturing sites as a feedstock or energy source. The company also owns land, pipelines and storage in some of the key areas being explored in the UK. All that, coupled with INEOS’ clear manufacturing excellence, strong safety focus and good relationships with the communities in which it operates, means that its new oil and gas exploration business INEOS Upstream brings something unique to the emerging shale gas industry.

INEOS UPSTREAM INEOS make chemicals out of oil and gas, to supply many of the raw materials for manufacturing across the UK and beyond. Manufacturing companies depend on secure and competitive supplies of these raw materials and energy to prosper. With this in mind, INEOS has recently set up a new, UK registered, oil and gas exploration and production business called INEOS Upstream.

The business made its first move into the shale exploration arena on the

18th August 2014 with the purchase of a 51% share of the shale section of a joint Petroleum Exploration and Development Licence (PEDL). The PEDL 133 licence covers 329 square kilometres of the Midland Valley of Scotland which includes INEOS’ Grangemouth refining and petrochemical complex and the area around it. On 10th March 2015 INEOS Upstream agreed a deal with IGas to acquire the remaining share in this license (The IGas deal also includes interests in multiple licences in the north of England). The business also owns an 80% interest in Petroleum Exploration and Development Licence (PEDL) 162, in the Midland Valley of Scotland. This licence area of 400 km2 is next to PEDL 133.

INEOS’ VISION FOR SHALE GASOur vision for shale gas stems from our experience as a user in the United States. We have seen first-hand how shale gas transformed U.S. manufacturing by providing a secure and competitive supply of energy and raw material. Ten years ago investment in manufacturing in the USA had dried up, today this

trend has reversed. For example in the chemicals sector $150 billion is being invested in new facilities creating hundreds of thousands of jobs. In the UK, meanwhile, the chemicals industry faces a difficult challenge, with its supply of raw material from the North Sea (particularly ethane and other light hydrocarbons) rapidly drying up, and energy prices becoming increasingly uncompetitive compared to the rest of the world. As a result the UK has seen a number of high-profile closures in recent years and investment is being diverted abroad.

We see shale gas as an opportunity for the UK to redress this, reinvigorating the petrochemicals industry and the manufacturing sector that relies on its products. The Independent Expert Scientific Panel set up by the Scottish government has recognised that this could be particularly beneficial for Scotland, given the importance of the petrochemicals industry to the economy. With North Sea oil operations facing decline, shale gas extraction could provide valuable new jobs and replace important tax revenues.

65 SITES 16 COUNTRIES17,000 PEOPLE

INEOS

RENEWABLE ENERGYNEEDS A BACK UP

INEOS HAS 7 SITES IN THE UK

INEOS EMPLOYS 4000 PEOPLE IN

THE UK

INEOS was started in the UK in 1998. It is now one of the largest chemicals companies in the world, with 65 sites in 16 countries. In the UK we have large sites at Grangemouth, Runcorn, and on Teesside, which employ thousands of skilled workers and make a significant contribution to their regional economies. Our products are the building blocks that underpin the manufacturing sector, and go into everything from medicine and clothing, through to buildings, vehicles, computers, and green technologies.

KEEP IN CONTACT: WWW.INEOSUPSTREAM.COM TWITTER: @INEOS_UPSTREAM #LETSTALKSHALE

INEOS PLANS TO INVEST MORE WIDELY IN SHALE GAS EXTRACTIONIn addition to the licences we purchased in the Midland Valley, INEOS has also announced a deal to acquire a 50% interest in seven IGas shale gas licences in the North West of England (the Bowland licences). This consists of a 60% interest in three Petroleum Exploration & Development Licences (PEDLs 145, 193 and EXL273) and a 50% interest in a further four licences (PEDLs 147, 184, 189 and 190). As part of this deal the company will also acquire IGas’ entire interest in PEDL 133 (the Grangemouth licence) which will give the company 100% ownership of this asset. INEOS also has the option to acquire 20% in two IGas East Midland shale gas licences (PEDLs 012 and 200)

INEOS has applied for new licences in Scotland and England as part of a competitive licensing bid. If successful we would like to invest £640 million in extraction to provide UK Manufacturing with secure and competitive supplies of raw material and energy. Shale gas is not about short-term speculation for us, but about investing in the long-term future of our sites that provide thousands of skilled jobs in regional economies, and underpin the UK manufacturing sector.

ESSENTIAL FOR UK MANUFACTURINGThe cost of energy, in the form of gas, in Europe is three times higher than the USA today, whilst electricity is 50% higher. About 80% of UK homes rely upon gas for heating or cooking, and our indigenous UK supply from the North Sea has now dwindled to less than 50% of our demand. So we are importing more from overseas.

People want a secure affordable and reliable energy supply. We have a clean energy resource in UK shale that is ready for development, and this can bring a wide range of benefits to the country.

UK shale can help to protect manufacturing and jobs by providing competitive secure energy and raw materials.

INEOS is keen to be part of this development and we will be pursuing sensible opportunities to safely develop shale gas for the company and for the country.

The Government has recognised that shale gas has the potential to provide the UK with greater energy security, growth and jobs, and help the UK’s chemical and energy-intensive UK manufacturing industry to succeed. Done properly, responsible shale gas extraction within a strict regulatory framework presents significant opportunity for the UK with minimal environmental impact.

INEOS PERSPECTIVEAs a chemical manufacturing company INEOS owns land, national pipeline systems and infrastructure, and storage. It operates top tier COMAH sites across Britain which brings with it a wealth of expertise in safely handling and storing flammable, pressurised gases. Our sites operate to the highest environmental standards backed by sophisticated environmental systems and a strict monitoring and reporting regime. Our focus on safety and high engineering standards means that INEOS brings something unique to this emerging industry.

Few companies in the UK have our expertise above ground but INEOS also employs substantial expertise below ground. Experts from Mitchell Energy, the company credited with pioneering shale gas extraction in the USA are now working for us. Drilling expert Nick Steinsberger and geologists Kent Bowker and Dan Steward are working exclusively with INEOS’ own experienced onshore gas exploration team to ensure the highest standards are applied to our operations.

THE RIGHT EXPERTISE, INFRASTRUCTURE AND APPROACHINEOS plants are strategically located in the UK’s industrial heartlands, close to shale gas resources. Safety is our highest priority. INEOS operates top tier COMAH plants within a strict environmental monitoring regime.

INEOS aims to be a good neighbour to build the trust of communities living and working close to our sites.

INEOS owns water treatment facilities and abstraction and disposal points around our UK sites.

INEOS is well capitalised.

INEOS has unparalleled experience above ground and onshore gas exploration and extraction.

THERE IS INCREDIBLE POTENTIAL TO PROVIDE THE UK WITH GREATER ENERGY SECURITY, GROWTH AND JOBS, AND HELP THE UK’S CHEMICAL INDUSTRY AND ENERGY-INTENSIVE MANUFACTURING TO SUCCEED, WORLDWIDE.GARY HAYWOOD, CEO INEOS UPSTREAM

FURTHER FACTS:n SEPA: www.sepa.org.uk/customer_information/energy_industry/ unconventional_gas/frequently_asked_questions.aspx

n Office of Unconventional Gas: www.gov.uk/government/groups/office-of-unconventional-gas-and-oil-ougo

n DECC website: www.gov.uk/government/organisations/department-of-energy climate-change

n UKOOG: www.ukoog.org.uk

n Frackland Blog: www.frackland.blogspot.co.uk

n No Hot Air: www.nohotair.co.uk/index.php/library

n ReFINE: www.refine.org.uk

n Frac Focus: www.fracfocus.org

n The Boom: www.russellgold.net/books/the-boom

n US EPA: www2.epa.gov/hydraulicfracturing

n PENN State University: http://stateimpact.npr.org/pennsylvania/tag/fracking/

n Range Resources: www.rangeresources.com

n CONSOL Energy: www.consolenergy.com

INEOS IS COMMITTED TO SHARING THE BENEFITS OF EXTRACTION WITH COMMUNITIESShale gas extraction has transformed communities in the USA where landowners own the mineral rights under their property. INEOS has developed an industry leading community benefits package that seeks to replicate this, giving communities a real stake in development. INEOS has promised to share 6% of revenues. Four percent of this would go to homeowners and landowners in the immediate vicinity of a well, and a further 2% to the wider community. Based on our estimates, a typical 10km by 10km development area would generate £375m for the community over its lifespan.

Overall we anticipate that our future shale gas business could contribute over £2.5bn to communities under this scheme, having a material impact on regional economies and the standard

of public services. We recognise that more work needs to be done to define how revenue is shared and we are committed to ensuring power is devolved as far as possible and revenue is secure from interference or clawbacks. We want to listen to what communities have to say on this matter, and will consult them fully.

INEOS IS COMMITTED TO OPEN CONSULTATION AND WINNING A SOCIAL LICENCEINEOS recognises that shale gas extraction is a controversial issue and communities have understandable questions about the potential risks and rewards. We welcome the opportunity to take part in a national public consultation, and engage comprehensively and openly with communities at every stage to accurately convey the risks and rewards, so they can make an informed judgment about extraction. It is the view of mainstream scientific authorities such as the Royal Society and Royal Academy of Engineering that shale gas can be extracted safely with appropriate regulation, and there could be real benefits from doing so, including jobs, tax revenue, local investment and improved energy security. It is vital to have a thorough and evidence-based conversation to ensure this opportunity is considered properly.

HOW INEOS WILL SHARE THE REVENUE

10km

10km £375 MILLION

£250m

£2.5bn

HOME AND LANDOWNERS

IN TOTAL COULD GO TO COMMUNITIES

£125mWIDER COMMUNITY

INEOS UpstreamPO Box 21Bo’Ness RoadGrangemouthStirlingshireFK3 9XH

www.ineosupstream.comtwitter: @INEOS_upsteam#letstalkshaleemail: shale.information@ineos.com