Rolls-Royce is in talks with chemicals group Ineos to use nuclear technology at its Grangemouth refinery in a move likely to prompt concern from the Scottish Government.

The FTSE 100 engineering group is part of a government-backed initiative to develop between 20 and 30 small modular nuclear (SMN) reactors around the UK.

Ineos, owned by the billionaire Sir Jim Ratcliffe, is planning to use hydrogen to power the Grangemouth plant, but creating zero-carbon hydrogen from water requires large amounts of electricity, and it is considering a range of options.

Rolls’ talks with Ineos, first reported by The Sunday Telegraph, are understood to be at an early stage. Ineos’s Grangemouth refinery refines crude oil and produces chemicals in a joint venture with PetroChina. Neither company, nor the Scottish Government commented on the article. The Scottish Government is opposed to nuclear energy.

Rolls-Royce has received £280 million of investment from private firms, including the Qatar Investment Authority, and a £210m government grant to support it through the safety approval process.

It believes it can cut the cost of the reactors by building the parts in factories and assembling them on site.

Warren East, Rolls-Royce’s outgoing chief executive, has said that the SMR revenues could end up being many times larger than its current business, as global demand for zero-carbon energy increases during the transition away from fossil fuels. However, the company still has a host of regulatory and political and financial problems to overcome.

Ministers are finalising plans to support the project through a body called Great British Nuclear, which will be responsible for getting planning permission and undertaking the preparation work on the new sites