UK pledges more than £35 million to boost shale industry

The UK government will offer a £36 million funding boost for the nascent shale industry for the next tax year, through investment in research test centres and public engagement.

Chancellor George Osborne’s final Autumn Statement said the government would be “taking steps to ensure that the UK leads the way with shale gas regulation” by allocating £31 million in funding for “sub surface research test centres” as well as £5 million in funding to better engage with the public on the shale industry’s regulatory process.

The test centres, to be funded through the Natural Environment Research Council, will produce research relevant to both the shale and carbon capture and storage industries, the statement said.

The government will also fund a £5 million drive to “ensure the public is better engaged” with the shale development regulatory process through independent evidence on “the robustness of the existing regulatory regime”.

In addition, Osborne confirmed plans to establish a long-term investment fund for communities in the north of the country hosting shale development using revenue from shale tax to ensure that the economic benefit to the area continues for generations.

The raft of measures may help to bolster public acceptance of the controversial process of extracting shale oil and gas from onshore reservoirs, following a vocal backlash from communities opposed to fracking which has slowed industry development.

Early projects include Cuadrilla’s licence area in Lancashire, of which Centrica holds a 25 per stake, and the Dart Energy operated license near Stirling in Scotland which has already secured a five year gas supply deal with SSE Energy.

“The pace of shale gas exploration has been painfully slow with no planning applications approved yet,” said EY partner Chris Lewis.

“With that in mind the announcement of a sovereign wealth fund in the North with a focus on shale gas is a welcome move that should increase support locally, as well as ensure that communities benefit from skills and jobs,” he added.

In his last Autumn Statement before next year’s general election Osborne showed strong backing for fossil fuel development – and little mention of the ‘green economy’ – with tax breaks offered to developers in the declining offshore oil and gas industry also announced.

Osborne promised offshore developers “an immediate 2 per cent reduction in the rate of the supplementary charge, from 32 per cent to 30 per cent, taking effect on 1 January 2015,” and said government would aim to reduce the rate further in an affordable way, to encourage additional investment and sustain offshore tax receipts over the long term.

By contrast the chancellor said renewable energy developers receiving funding through existing support regimes would not qualify for tax-advantaged venture capital schemes, with the exception of community energy generation undertaken by qualifying organisations.

The Autumn Statement followed the UK’s National Infrastructure Plan outlined on Monday which the included plans for the Swansea Bay Tidal Lagoon, which government said shows it is “serious” about the potential for tidal power.