George Osborne’s plans will see shale gas producers pay 30% tax on profits, compared to the 62% tax rate levied on new oil extraction developments in the North Sea.
The decision has been widely criticized by environmental groups, such as Greenpeace and Friends of the Earth.
‘A resource with huge potential to broaden the UK’s energy mix’
Speaking on the initiative, Osborne said: “Shale gas is a resource with huge potential to broaden the UK’s energy mix. We want to create the right conditions for industry to explore and unlock that potential in a way that allows communities to share in the benefits.
“This new tax regime, which I want to make the most generous for shale in the world, will contribute to that. I want Britain to be a leader of the shale gas revolution – because it has the potential to create thousands of jobs and keep energy bills low for millions of people.”
Greenpeace energy campaigner, Lawrence Carter said: “The chancellor is telling anyone who will listen that UK shale gas is set to be an economic miracle, yet he’s had to offer the industry sweetheart tax deals just to reassure them that fracking would be profitable.
“Experts from energy regulator Ofgem to Deutsche Bank and the company in receipt of this tax break, Cuadrilla, admit that it won’t reduce energy prices for consumers. Instead we’re likely to see the industrialisation of tracts of the British countryside, gas flaring in the home counties and a steady stream of trucks carrying contaminated water down rural lanes.”
A solution to rising energy prices?
Osborne’s announcement came just days after a UK Energy Research Centre poll revealed that 83% of customers are concerned that energy prices could become unaffordable. In contrast, the US has managed to reduce energy prices by taking advantage of its shale fuel reserves.
To date, no shale gas has been produced in the UK, although a number of exploratory drillings are currently underway. The British Geological Survey recently estimated that there may be enough shale fuel in the UK to supply the country for a quarter century.