Dec. 5 (Bloomberg) — The U.K. will consider tax breaks for
shale-gas exploration as the government seeks to cut dependence
on energy imports and hold down household electricity bills,
Chancellor of the Exchequer George Osborne said.
Hydraulic fracturing, using pressurized water to drive gas
from shale rock, was suspended after Cuadrilla Resources Ltd.
set off two earthquakes last year in northwest England. The
government, which says the ban ends soon, will set up an Office
for Unconventional Gas to regulate the industry, Osborne said.
The chancellor wants the U.K. to give priority to gas as a
power source as it’s cheaper than renewables and less harmful to
the environment than coal. The U.K. also seeks to curb reliance
on natural gas imports that have almost doubled since 2007 as
local output dwindles. U.S. natural gas prices fell 87 percent
from 2008 to this April as production from shale fields boomed.
“We don’t want British businesses and families to be left
behind as gas prices tumble on the other side of the Atlantic,”
Osborne said in his Autumn statement to parliament. His plans
may place Britain ahead of efforts on the continent, where
countries have hesitated to endorse the technique known as
fracking because of concerns it will pollute water.
The Czech Republic proposed a temporary ban on exploration
of shale deposits in September and France decided that month to
maintain a ban. The Netherlands says it plans to conduct a study
of the environmental effect of shale- and coal-gas exploration.
Environmental Impact
Pushing shale would be a “costly mistake”, according to
Andy Atkins, executive director at Friends of the Earth.
“Unleashing fracking on communities across the nation
would threaten their environment and keep the nation hooked on
dirty fossil fuels for decades,” he said in a statement.
European shale development will be more controversial and
costly than in the U.S., now the largest natural-gas producer as
a result of fracking, because public opposition and geological
challenges are less pronounced in America, GlobalData Ltd. said.
“I can’t imagine how shale gas production could have a
significant impact on European gas prices,” with its cost and
volume uncertainties, Jonathan Lane, the head of consulting for
power and utilities at GlobalData, said by phone.
Accurate figures for commercial quantities of the resource
are hard to establish as the U.K. is only exploring, said Nick Riley, head of science policy at the British Geological Survey.
All of Iraq
Cuadrilla Resources, seeking approval to drill, fracture and
test a number of wells next year, says the shale rock it’s
exploring in northwest England has more gas than all of Iraq.
The Staffordshire-based company welcomed today’s news.
“Exploration is necessary to have a better understanding
about how shale gas can be developed safely and sensibly from
the Bowland Basin,” Chief Executive Officer Francis Egan said
in a statement. The technology’s high costs will fall as the
industry grows, he said.
The Department of Energy and Climate Change will consult
on the terms and duration of shale exploration licenses, it said
today. The ministry also set out plans for as many as 30 new
gas-fired power stations with 26 gigawatts of capacity in a gas-
generation strategy designed to shore up supply as a fifth of
current capacity is scheduled to close in the next decade.
Environmental campaigner WWF said Britain may miss its
legally binding targets to cut greenhouse gas emissions by 80
percent by 2050 and add to consumer bills should it push ahead
with the gas plans. Energy Secretary Ed Davey said the strategy
is consistent with targets that the U.K. can revise in 2014.
Osborne also confirmed that the Carbon Reduction Commitment
green tax, which aims to cut emissions from large public and
private organizations, will be retained in a “simplified”
form. He said in March that the levy might be replaced.
To contact the reporter responsible for this story:
Sally Bakewell in London at
Sbakewell1@bloomberg.net
To contact the editor responsible for this story:
Reed Landberg at
landberg@bloomberg.net
