Delivering his annual Budget in the House of Commons, Osborne – a well-known and vocal advocate of natural gas and shale gas – told MPs: “Shale gas is part of out future and we can make it happen.”
The government is to introduce a new shale gas field allowance and extend the ring-fence expenditure supplement from six to ten years for shale gas projects to promote investment in the industry.
In the Budget document, it states that “a successful UK shale gas industry has the potential to provide new employment and support UK energy security, benefiting the economy, taxpayers and communities”.
It adds that the government will produce technical planning guidance on shale gas by July to “provide clarity around planning for shale gas during the important exploration phase for the industry”.
“As the shale gas industry develops, the government will ensure an effective planning system is in place and by the end of the year will produce guidance for the industry to ensure the planning system is properly aligned with the licensing regime and regulatory regimes, principally health and safety and environmental protection.”
UKOOG, a trade body for onshore oil and gas operators, welcomed the move. Its chief executive Ken Cronin said: “The proposed taxation measure will be a catalyst for increasing UK drilling activity and thereby attracting new and additional investment. This increased activity will reduce future capital costs in addition to improving the economic threshold for exploitation.”
He said the UK was “entering an important phase in terms of the exploration of shale and other forms of unconventional oil and gas”.
“The industry believes there is a very meaningful amount of gas in place in the UK and the public deserves to know and understand the potential of these natural resources to deliver energy security, jobs and growth. The announcements in the Budget today will help the industry to take the next steps in assessing this resource.”
Bob Ruddiman, head of energy and natural resources at international law firm Pinsent Masons, said the chancellor’s decision would “ultimately define how the industry will develop”.
He said government support was “crucial for the industry” but cautioned that “there will be disappointment in the market if there is the same kind of delays and confusion as we’ve previously seen with energy policy”.
“We hope to see a speedy and smooth running process leading to decisions being made and enabling shale gas to develop in the UK,” he added.
However, Greenpeace executive director John Sauven was scathing of the shale gas decision. “This was a twentieth-century budget for a twentieth-first century economy,” he said. “Bungs to the gas industry make it harder for Britain to meet its climate targets and stifle the low carbon sector, which provided one third of all UK growth between 2011 and 2012. Green jobs and investment are at risk here.”
He said the chancellor “needs to stop playing Britain’s JR Ewing and instead back the shift to carbon free energy, which will create jobs and be cleaner, safer and cheaper over time.”