UK creates new office for unconventionals

Speech: UK Chancellor of the Exchequer George Osborne delivers his autumn budget in parliament this week

The UK has created a new regulatory body to oversee unconventional gas exploration and production and pledged further consultation on tax measures and licensing for the fledgling sector.

The announcement was made by Chancellor of the Exchequer George Osborne as the Conservative and Liberal Democrat coalition government also unveiled a new strategic plan to underpin natural gas development and its use in power generation.

Osborne told parliament: “We don’t want British families and businesses to be left behind as gas prices tumble on the other side of the Atlantic.”

He said the gas strategy would ensure the UK made “the best use of lower cost gas power, including new sources of gas under the land”.

The newly created Office for Unconventional Gas & Oil will join up responsibilities across government departments to streamline regulation, also acting as a contact point for investors, meaning “safe but simple” regulation, Osborne said.

The Department of Energy & Climate Change (DECC) said in its gas generation strategy: “If economic and safe, shale gas could... offer new economic opportunities for the UK.

“If testing proves positive, shale gas production might commence in the second part of this decade, but production is likely to grow more slowly than has been seen in the US.”

Consultations will also take place on possible improvements to the shale gas licensing regime and on an updated strategic environmental assessment with a view to further onshore licensing.

The announcements come a week after Energy Secretary Ed Davey introduced the government’s long-awaited Energy Bill to Parliament to ensure the UK keeps the lights on and delivers on legally binding carbon targets. The DECC believes 26 gigawatts of new gas-fired power plant could be needed by 2030 to plug holes in intermittent electricity production from renewables.

Davey, this week at the United Nations Climate Change talks in Doha, hinted previously that a ban on hydraulic fracturing could be lifted soon.

The controversial extraction technique was banned temporarily in the UK more than a year ago after seismic tremors were recorded at a Cuadrilla Resources explor­ation site near Blackpool.

Environmental groups criticised this week’s announcements.Friends of the Earth executive director Andy Atkins said: “The big polluters must think Christmas has come early.”

Referring to widely reported rows between the Liberal Democrat Davey and Conservative Osborne over energy policy, he added: “While Ed Davey attempts to show leadership at the Doha climate talks, the chancellor is hard at work handing out tax breaks to the fossil fuel industry that threaten to make a mockery of UK commitments to slash emissions.”

Industry body Oil & Gas UK welcomed the governments’ support for natural gas but voiced was concern about the new regulatory body for unconventionals.

The group’s economics director, Mike Tholen, said Oil & Gas UK would prefer responsibilities to remain within an expanded and “well resourced” DECC.

Cuadrilla Resources said it was seeking approval to drill, fracture and flow test a small number of wells in 2013.

“Exploration is necessary to have a better understanding about how shale gas can be developed safely and sensibly from the Bowland basin,” said chief executive Francis Egan.

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