Chancellor confirms UK will chase US shale gas glut

The Chancellor today confirmed the UK will give chase to a US-style shale gas boom by consulting on what tax incentives to give the controversial fuel source and creating its […]

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By Vicky Ellis

The Chancellor today confirmed the UK will give chase to a US-style shale gas boom by consulting on what tax incentives to give the controversial fuel source and creating its own department, a new Office for Unconventional Gas.

The move will give certainty to developers in the UK including Cuadrilla Resources whose CEO recently suggested they would not wait forever to invest in the UK. However it is sure to be a bitter blow for environmental campaigners opposed to “fracking”.

Announcing the Government’s Gas Strategy in his yearly Autumn Statement today, Mr Osborne suggested shale gas would help British families benefit from low gas prices similar to those experienced in the States.

The Chancellor declared: “We are consulting on new tax incentives for shale gas and announcing the creation of a single Office for Unconventional Gas so that regulation is safe but simple. We don’t want British families and businesses to be left behind as gas prices tumble on the other side of the Atlantic.”

Contrary to demands from up to 300 protestors outside Westminster over the weekend to ditch a dash for gas, the publication of today’s Gas Strategy confirms unabated gas will “continue to play a crucial role in our generation mix for many years to come and the amount of gas we need to call on at times of peak demand will remain high”.

It adds DECC modelling suggests “up to 26 GW of new gas plant could be required by 2030 (in part to replace older coal, gas and nuclear plant as it retires from the system).”

Engineers said the Chancellor’s Statement gave “very welcome clarification” on the role of gas in bridging a “looming” energy gap in the middle of the decade.

Dr Tim Fox, Head of Energy and Environment at Imeche said: “It is sensible for the UK to invest in gas-fired power plants at this point in time as they are cleaner than coal, needed to back-up intermittent renewable energy sources and can be built quicker with much lower up-front costs than nuclear plants.

But he warned the UK must not become “over-reliant” on gas: “The UK’s off-shore gas reserves are dwindling and given that the contribution of shale gas will probably be limited to a few percent of future UK demand, we are unlikely to ever be self-sufficient in gas.”

David Smith, Chief Executive of Energy Networks Association added: “Gas has a vital role to play in a balanced mix, not just for generation but for heating our homes. The UK’s energy future must be affordable and deliver on climate change targets and this means a balanced approach that retains gas for many decades.”

Last month the gas market had a brush with scandal when a whistle-blower at an energy reporting firm alleged prices were being fixed, Libor-style, prompting the Government to begin an investigation into the gas market.

Experts believe global wholesale gas prices are the cause of recent rises in energy bills. The Chancellor’s argument goes that a national shale gas resource would counter external gas price increases.

However environmentalists claim George Osborne is “misleading” the public about the benefits of shale gas.

Greenpeace political director Joss Garman said: “The Chancellor is misleading people to position shale gas as the answer to UK’s energy woes. The impact of fracking in the US is irrelevant because energy experts say the US shale gas boom cannot be replicated here.”

Andy Atkins, Executive director of Friends of the Earth said “The big polluters must think Christmas has come early – but if bad Santa Osborne’s gas-fired energy strategy gets the go-ahead it will leave cash-strapped households and the environment with a thumping hang-over for decades.”