SHALE TRAIL
Will the UK Government’s latest ‘dash for gas’ with fracking be a golden repeat of the North Sea oil boom or become a serious risk to public health and safety?
Opinion is divided between green opponents of attempts to cash in on the controversial resource and those proponents who argue vast deposits of gas below much of the country will dig Britain out of its energy crisis.
The debate has been stoked following claims in June by the British Geological Society that there could be more than 1,300 trillion cubic feet of shale gas under the North of England alone.
At current predictions, around 10 per cent of this should be recoverable – enough to fuel the nation for about 40 years, according to supporters.
And last month Chancellor George Osborne unveiled some of the most generous tax breaks in the world to kick-start this energy revolution in Britain.
The Treasury says that taxation on shale gas will be cut from 62 per cent to just 30 per cent, which the Chancellor reckons could boost investment in the industry to £14 billion a year.
It won’t just be companies that will gain. Local communities in those areas where extraction takes place will scoop 1 per cent of production revenues, as well as £100,000 per fracking well.
The United States has already benefited from its own shale gas boom, relying far less on oil imports now and providing energy consumers with a much cheaper alternative. According to the ratings agency Moody’s, the shale gas boom in America has generated more than 1 million US jobs.
For investors, too, the potential is huge.
If fracking’s potential is as good as we’re being told it could be, there will soon be a surge in profitability, rising share prices and attractive returns on offer for shareholders of those firms leading the charge. While there remains a long road to travel yet in terms of legislation and testing, the excitement building in the City of London is tangible.
Companies with licences for British shale areas have understandably welcomed the tax break announcements by the Chancellor. Those set to benefit include Aim-listed IGas and Dart Energy, equipment-maker John Wood Group and British Gas-owner Centrica – which acquired 25 per cent of Cuadrilla Resources in June.
Of course, the environmental concerns have to be weighed against the commercial benefits. But even the most ardent green lobbyist must recognise that Britain is facing a crisis of epic proportions when it comes to security of energy supply.
The UK is already a net importer of gas. Any interruption in supplies risks hiking up domestic and business energy bills or even seeing some customers cut off. Our coal-fired plants are closing or already shuttered.
Meanwhile, nuclear energy is in disarray with no new plants likely for at least another decade. There is still no sign of agreement on the crucial strike price – the guaranteed minimum EDF would get for power generated at a new plant.
Green technologies like wind are as yet incapable of fulfilling all our everyday energy needs.
The introduction of a tax regime that levels the playing field for shale gas with small offshore oil and gas fields must surely be a welcome step in the right direction.
But the industry will need to be tightly regulated to minimise the chances of something going wrong. Lobbyists have legitimate concerns over the chemicals used in the fracking process contaminating local water supplies, and the anecdotal evidence elsewhere that drilling for shale gas can increase the risk of earthquakes.
Drilling and fracturing must be strictly controlled. Three government agencies, plus the local authority, will have to sign-off on every project. Environmental impact assessments will be necessary along with permits to be agreed before fracking begins.
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