Ratcliffe’s billion dollar bet on the shale revolution
THE British Consul- General should have been standing on the podium with rags-to-riches billionaire Jim Ratcliffe, in Qidong, two hours north of Chinese city of Shanghai.
Instead it was the Swiss ambassador who marked the latest milestone for British-born chemicals giant Ineos, the world’s third-largest chemicals group, as annual sales top £34bn.
Five years ago it upped sticks and fled to Rolle, near Geneva, following a row with the Labour Government over tax.
But Ratcliffe used the launch of two new Chinese-built tanker ships he commissioned to signal a partial return to his homeland, following entreaties from a Conservative minister, thought to be Chancellor George Osborne.
‘They [the Government] have been giving me a hard time,’ said the entrepreneur, munching on a sandwich in the coach returning from the Qidong shipyard.
‘So we will open a new twin head office in Knightsbridge [Central London] to reflect the importance of our expanding business in the UK.’
Tall and gangly, Ratcliffe, 62, has his back to the window and legs jutting out into the gangway. He is more nutty professor, with wispy unkempt hair and a white shirt that refuses to tuck into his suit trousers, than slick capitalist tycoon.
While the firm’s domicile remains in Switzerland, where his corporate tax rate is just 7pc, Ratcliffe seems open to an eventual ‘gravitation’ back to London.
It would make sense for the Manchester-born boy whose parents moved from their council house in the city to Beverley, Yorkshire, aged ten, before he went on to study chemical engineering at Birmingham University. He is now worth more than £3bn.
INEOS employs 4,000 people at seven UK sites. This includes Britain’s biggest chlorine plant in Cheshire and the Grangemouth refinery in Scotland, which Ratcliffe controversially threatened to close after a row with unions.
The privately owned firm, in which the tycoon holds a 60pc stake, has 65 plants in 16 countries employing more than 17,000 staff.
Its rapid growth from nothing 17 years ago to what would be a FTSE 100 giant – if it had a public listing – is remarkable.
Ratcliffe bought up unwanted chemical divisions from firms such as ICI, BP and BASF and used these operations to process byproducts that oil and gas giants could not use.
When oil and gas comes out of the ground 90pc of it is used to power homes and fuel cars, but the remainder is unsuitable. But Ratcliffe takes this 10pc to make plastics such as polyester, PVC and polystyrene which can be used for drinking bottles, car bumpers, suitcases and clothing.
It is firms like this that helped cement the UK as an industrial powerhouse in years gone by. Ratcliffe blames successive UK Governments for losing that legacy.
‘Step back 20 years to 1995,’ he says. ‘Britain had the same level of manufacturing as Germany. Around 25pc of the economy, and jobs, were in manufacturing. While Germany is still in the same place, the UK has collapsed to 12pc.
‘The UK Government has had a love affair with financial services and all its energy and efforts are in that. There are not many reasons to invest in manufacturing in the UK because the Government does not value it.’
Despite this Ineos still has a sizeable business in the UK and Ratcliffe is in China to launch the first two of eight huge tankers, costing £640m in total, which will transport liquefied natural gas between Grangemouth and America.
The gas will emanate from fracking, the controversial process of pumping high pressure water and sand underground to fracture rock and release valuable new energy reserves known as shale gas.
The marathon runner, who also owns a collection of high-performance motorbikes and the Hampshire II, a 258ft yacht reputed to cost £100m with a crew of 23 and helipad, is an advocate of fracking.
The process is banned in France and Italy because homeowners are worried it could destabilise the ground under homes. But it has been embraced in the USA and has driven down the cost of energy, helping boost the country’s economic recovery.
It is allowed in the UK but has faced mounting public opposition.
Ratcliffe claims he would be happy to live above a fracking well: ‘The so- called problems are all myths. In America more than 25m people live within one kilometre of a shale well and there have been no major incidents.
‘There are lots of risks in making chemicals – you wouldn’t fill your car with petrol while smoking a cigarette – but so long as it is done properly it’s fine.’
Ratcliffe believes the reticence could be solved by offering homeowners a 6pc cut from anything found under their land.
Ratcliffe certainly wasn’t surrounded by wealth when growing up. The son of an accountant and a joiner father, he showed an early aptitude for science, studying maths, physics and chemistry A-levels and then reading chemical engineering at Birmingham.
On graduating he joined Courtaulds and then Exxon in different roles, including accounting, marketing and business management.
HE TOOK an MBA, qualified as an accountant and joined US firm Advent. In 1998 he led his own management buyout of a firm that became Ineos, and started growing it.
He said he knew at school he wanted to have his own business: ‘ Taking the easy path doesn’t always lead to success. Occasionally you need to take a challenge.’
This is something he believes the UK should do in terms of coming out of the EU. He says: ‘The EU is inefficient and expensive with layers of bureaucracy. All we need is a common market.’
Shipping shale gas across various territories is fraught with red tape but he says it is the future.
He is only interested in a part of the shale gas that the energy firms can’t use called ethane. He can use this for his plastics business. Ethane from the North Sea is expensive because it is scarce. But in America the boom in shale gas means ethane is abundant and cheap.
It is so cheap it is cost effective for him to buy the ethane in America, build a pipeline linking it to a processing plant by the US coast and then spend $1bn on eight new ships made in China.
The ships then take the gas, which has to be frozen to -90C so that it can be transported in a liquid form, across the North Atlantic to his plants in Grangemouth, and Norway, to be turned into plastics.
‘People said it couldn’t be done,’ he says. ‘But I like a challenge and proving people wrong.’
Ratcliffe has walked with his sons to both the South and North Pole, and took three months off two years ago for his 60th birthday to go motorbiking around Africa. Worried about losing touch with the business, he flew his entire board out to a game reserve in Botswana to update him on developments.
‘The mountain came to Mohammed,’ said one director. It is not such a different idea to shipping frozen ethane across the Atlantic.