UK Shale Gas Industry to Receive Boost from Generous New Tax Regime

In his latest speech, which he gave to his party in a conference on Monday, George Osborne, the Chancellor of the Exchequer, gave hope to the UK shale gas industry.

He stated that, “we are today consulting on a generous new tax regime for shale so that Britain is not left behind as gas prices tumble on the other side of the Atlantic.”

Shale gas in the UK needs all the help that it can get. Due to difficulties that arise from mineral rights, population density, and environmental regulations, only a few wells have been drilled so far, far fewer than the hundreds or thousands that are needed to fully explore shale gas potential, and initiate a boom in the UK.

Ed Davey, the Energy and Climate Change Secretary who has been George Osborne’s opponent in almost all energy matters since the two took office, is not quite as positive about shale gas. “I know that industry analysts do see shale as a rather different proposition here than in the US. Questions about regulatory oversight and the involvement of local communities need to be answered rather than simply dismissed. And, of course, the deployment of any new energy source must be consistent with our carbon plan and carbon budgets.”

The Treasury has released a statement saying that, “with the shale gas industry at an early stage of development, the government believes that a targeted tax regime will help unlock investment. The use of field allowances to encourage investment in the North Sea has demonstrated the effectiveness of a targeted tax regime in stimulating investment and production that would not otherwise have gone ahead. The government will engage with companies to ensure that the final structure of the regime is appropriately targeted while maintaining a fair return for the exchequer.”

Many fear that public opposition to shale gas, and even tougher carbon emission targets, will scare investors from the sector, despite the efforts taken by the Treasury to attract them.

By. Joao Peixe of Oilprice.com