UK Chancellor Plans Dash for Gas

The UK Chancellor of the Exchequer announced Wednesday plans to better exploit the UK's gas resources as part of his Autumn Statement.

The UK's Department of Energy and Climate Change added that it will establish an Office for Unconventional Gas and Oil to help streamline regulation of such practices as shale gas fracking as well as provide a single point of contact for investors in the development of unconventional hydrocarbon projects.

Chancellor George Osborne told the UK Parliament's House of Commons that H.M. Treasury is "consulting on new tax incentives for shale gas". Meanwhile, the government expects that between 26 GW and 37 GW of new gas capacity could be required by 2030 – which means that new gas-fired power stations that emit half the carbon dioxide of coal plants will need to be built.

DECC confirmed that the UK government is consulting on an appropriate fiscal regime for shale exploration and that DECC will consult on the terms and duration of licenses and on an updated 'Strategic Environmental Assessment' for future onshore licensing.

UK Secretary of State for Energy and Climate Change Ed Davey commented in a statement Wednesday:

“We have always said that gas will have a significant role in our electricity mix over the next two decades... Gas will provide a cleaner source of energy than coal, and will ensure we can keep the lights on as increasing amounts of wind and nuclear come online through the 2020s."

Anticipating the Chancellor's announcement, trade body Oil & Gas UK on Tuesday welcomed the moves to focus more on the development of natural gas and encourage its use in power generation.

Oil & Gas UK Economics Director Mike Tholen commented in a statement from the organisation:

"The government’s confirmation that gas will continue to play a fundamentally important role in the UK’s energy mix should give investors much-needed certainty to invest.

"We have long believed that when balancing the competing demands of lower emissions, security of supply, cost to consumers and economic competitiveness, gas has a greater role to play, especially in electricity generation, in the UK’s future energy mix than policies had previously allowed for. Natural gas can be relied on to keep the lights on."

However, Tholen also pointed out that, with a tax rate on offshore gas production of between 62 and 81 percent and a price that is typically around half that of oil, "attracting investment in gas projects on the UK Continental Shelf is needlessly difficult".

"Therefore, Oil & Gas UK believes that a consultation on how best to promote the development of onshore gas via the tax regime should sensibly encompass offshore gas reserves too," added Tholen.

The Chancellor has previously taken some action to reduce tax on gas production. In July this year, Osborne unveiled plans to establish a (GBP 500 million) field allowance for large shallow-water gas fields designed to secure future investment in North Sea gas as well as help create jobs in the UK and boost the country's energy security.

But not everyone was happy with Osborne's "dash to gas". Greenpeace UK political director Joss Garman commented in a statement:

"The Chancellor is misleading people to position shale gas as the answer to [the] 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.

"Over a third of the UK's economic growth in the last year came from the low carbon sector. By ignoring this and instead offering incentives to the gas industry, George Osborne is undermining crucial green growth.

"Green jobs and low carbon investment is where the UK's economic success story is, not fracking and road building. The Chancellor has his priorities wrong."