The government has ended months of uncertainty by agreeing to a near £100m bailout for chemical giant Ensus – allowing it to restart production of CO2 gas critical for the food sector.
The Department for Business and Trade today said the move would “safeguard CO2 production, ensuring Britain maintains critical supply during Iran war disruption”.
Ensus’ Teeside plant, which – until last year had produced about a third of the UK’s CO2 gas supplies – was mothballed last autumn. The company had warned it would ultimately have to close permanently, due to the impact of the UK’s trade agreement with the US in May.
That deal, signed between prime minister Keir Starmer and Donald Trump on 8 May, allowed for tariff-free access to the UK market for 1.4 billion litres of US bioethanol, effectively undercutting and ending UK production of the fuel – from which CO2 gas is sourced, alongside fertiliser production, as a byproduct.
Ensus had warned the conditions of the deal had rendered its businesses “unviable”. Meanwhile, Associated British Foods subsidiary Vivergo Fuels – which had planned to start production of the fuel and CO2 gas – abandoned its plans last August and shuttered its Hull plant, pointing to how the deal had “severely worsened” the already challenging regulatory situation for UK bioethanol producers.
Bailout talks over the future of Ensus’ plant at Wilton have continued with the government since last September, with its decision to place the facility on “standby” last autumn meaning the vast majority of the UK’s CO2 gas supplies have since been imported.
But against the backdrop of disruption to European fertiliser production and soaring gas and oil prices due to the Iran war and the blockade of the Strait of Hormuz, “combined with difficult market conditions” due to planned maintenance at European CO2 sites, DBT said the reliability of CO2 imports had “significantly reduced”.
This meant the UK’s market for CO2 “risks being undersupplied”, it warned.
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“Given the potential impact of a shortage on essential UK sectors – including healthcare, nuclear and food and drink production – the government has taken the decision to back the restart of activity at Ensus to safeguard critical national infrastructure and maintain a resilient supply of CO2,” it added.
CO2 gas has a number of uses within the food sector, from carbonating drinks to the slaughtering of livestock and controlled atmosphere packaging. Previous shortages of the gas have thrown up a series of food and drink supply issues – with a crisis in 2018 leading to a scarcity of a number of products. Supply fears were also raised in 2021 and 2022.
“By restarting this plant we’ve acted swiftly to boost the resilience of our supply chains and protect critical UK sectors like food production, water and healthcare, as well as the jobs and communities that depend on these industries,” said business secretary Peter Kyle.
The support package will see the Ensus plant restart for a temporary three month period, DBT added, providing “resilience” to the supply of the gas.
Government was “also taking steps to diversify the UK’s long term CO2 supply, to reduce future reliance on imports”, DBT said. “We will work with industry on our long-term plan to secure resilience in the sector,” it added.
Ensus said “regulatory changes could be implemented by the government that would improve the long-term viability of the UK bioethanol industry”.
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The food and bioethanol sectors have been lobbying government since last year to mandate the rollout of E20 fuel – a blend of 20% ethanol and 80% petrol – across the UK’s forecourts. The current industry standard is E10 fuel, which contains 10% ethanol.
Switching to E20 could allow for an increase in demand of bioethanol and safeguard British wheat production as a feedstock for the fuel, the NFU has argued, while also reducing demand for imported crude oil – the price of which has rocketed since the start of the Iran conflict.
“This agreement of support from the UK government is excellent news for our employees and those in our extensive supply chain,” said Ensus UK chairman Grant Pearson.
“It strengthens the broader Teesside Manufacturing Economy and the UK’s resilience in relation to biogenic CO2 supplies. These are vital to food and drinks companies, as well as being important to hospitals, abattoirs and the nuclear industry.”
He added: “We hope to have the plant back in full operation soon. This deal will also be very supportive to the UK agricultural and fuel markets including for the future expansion which is required in more sustainable aviation and maritime fuels and in the development of greener chemicals.”
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