UK announces controversial shale gas tax breaks

As analysts predicted, UK Chancellor George Osborne used his Autumn Statement to announce the creation of a government office for shale gas to simplify regulation of the unconventional gas sector.

According to, Osborne also offered tax breaks for companies that carry out hydraulic fracturing (fracking) —the process of using pressurised water and chemicals to drive gas out of shale rock.  Osborne argued that boosting the shale gas industry is vital to economic growth.

The announcement came roughly a year after the UK temporarily banned fracking for environmental reasons and fears that it could trigger earthquakes in the region.

Last month a government-commissioned report, by the British Geological Survey, found that Britain is sitting on a vast wealth of shale gas reserves, although only a small proportion of it can be accessed.

The creation of the Office for Unconventional Gas and Oil, implying that Britain will allow fracking work to resume, triggered harsh reactions.

"The government has just fired the starting gun on a second 'dash for gas',” told Mike Pigott, UK power sector director at the global programme management consultancy Turner & Townsend, in an e-mail statement.

Pigott adds that, although gas is a significantly cleaner energy source than coal, an increased reliance on it will encourage the further exploitation of Britain's shale-gas reserves, as it holds out “the tempting prospect of national energy independence.”

For Pigott gas will provide a good stopgap, not a total solution. He thinks it will be a vital part of Britain's future energy mix, but warns that it will never be enough to ensure the lights stay on by itself.

"Such a large investment in new gas-fired power stations will provide a welcome kick-start to the economy. But ultimately these bold plans can only be judged a success if the planned power stations secure not just the funding they need, but are also delivered efficiently," he concludes.


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