Producers of shale gas in the U.K. will be offered tax breaks that more than halve the amount they pay on profits, the government said Friday, in a move designed to kick-start the embryonic industry.
Producers of shale gas in the
U.K.
will
be offered tax breaks that more than halve the amount they pay on profits, the
government said Friday, in a move designed to kick-start the embryonic
industry.
No shale gas has yet flowed commercially in the U.K. so any profits from the
sector are some way off, but the government said Friday that producers will
have to pay just 30% tax, compared with the current 62%, in a move it hopes
will encourage exploration to begin.
George Osborne, the
U.K.
chancellor of the exchequer, said in a statement: "We want to create the
right conditions for industry to explore and unlock [shale's] potential...this new
tax regime, which I want to make the most generous for shale in the world, will
contribute to that."
The coalition government has been vocally enthusiastic about shale-gas
prospects, noting that commercial quantities have transformed the energy outlook
in the
U.S.
,
where natural-gas production increased five-fold between 2007 and 2012.
The British Geological Survey last month said that around 1.3 quadrillion cubic
feet of gas was contained within shale formations under the Bowland area in
northern England, twice the amount previously thought to be present in the
whole country. The U.S. Energy Information Administration, which made the
previous estimate, said that the two studies were based on different
methodologies.
The BGS made no estimate as to how much gas could ever be recovered. In the
U.S.
,
around 10% of shale gas resources have proved to be recoverable, according to
the U.K. Department of Energy and Climate Change in a report last year. Experts
point out that Britain's geology is very different to North America's, so it
isn't possible to make a comparison about how much might be extracted in the
U.K.
Mr. Osborne said that shale gas could create jobs and help keep down energy
costs. The
U.K.
has
some of the highest domestic energy costs in
Europe
:
household gas bills rose 55% between 2007 and 2012, according to the Department
for Energy and Climate Change.
Last month, U.K. energy giant Centrica PLC (CNA.LN) became the first major
utility to enter the fray, buying a 25% interest in exploration licenses on the
Bowland shale for 40 million pounds ($61.3 million) from Cuadrilla Resources
Ltd.
But opposition to shale gas exploration has come from environmental groups,
which say the process known as fracking--the injection of water and chemicals
into rock--could damage the countryside and pollute groundwater.
Even if fracking is safe, say others, shale gas is still a polluting fossil
fuel and doesn't provide a long-term solution to the
U.K.
's
energy problems. The country's fleet of aging coal and gas power stations needs
replacing, but there is a lack of consensus on what should take their place.
"Fracking, even by what its proponents think, is ultimately a stop
gap...[and] we're seeing with the fracking wells in the U.S. today the yields
are starting to decline," said Tobi Kellner, energy modeller at the Centre
for Alternative Technologies, during a briefing this week.
Advocating the building of a greener infrastructure, he said: "It's a
little bit like, as a kid, are you just going to shove another thing under your
bed...or are you actually going to stop and tidy your room?"
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