Osborne puts his foot on the gas again

Tony Bosworth

09 October 2012

George Osborne's announcement yesterday of a consultation on tax cuts for shale gas was unexpected, with the Department for Energy & Climate Change seemingly knowing as little of the detail as those beyond Whitehall.

It's interesting to compare the Chancellor's speech to that of Energy Secretary Ed Davey, a couple of hours earlier to an industry conference in London.

Mr Osborne wants to put his foot on the gas so "that Britain is not left behind as gas prices tumble on the other side of the Atlantic".  But Mr Davey said he wants to be more patient than the "excited British commentators ... touting shale gas as a silver bullet to bring Britain to a new age of cheap energy". But the Energy Secretary still says he hopes to be able to give the industry the green light.

Ed Davey said "industry analysts do see shale as a rather different proposition here than in the US". Why is this? The reasons include:

·         different geology in Europe which means the gas could be more costly to get at;

·         the US has an established onshore oil and gas drilling industry (think 'Dallas') - Europe doesn't;

·         environmental regulation will be tougher in the UK (although nowhere near as tough as it needs to be);

·         different mineral rights: in the US, the landowner owns the rights to any oil and gas under their land, creating a greater incentive to allow drilling; but in the UK the oil and gas belongs to the Crown.

All these factors mean that costs will be higher.

The industry claims that local production will somehow mean lower prices. If that was true, Aberdeen would have the cheapest petrol in Europe. Rather, the price of any UK shale gas will be set by European gas prices.

A report for the industry regulator OFGEM found that there was a 'low probability' of shale gas in Europe leading to significantly lower gas prices in the UK.

Nor do we need shale gas. Globally we have recoverable resources of conventional gas equal to 120 years' worth of current use - enough to fry the planet several times over in the words of one academic.

Shale gas is unconventional, unnecessary and unwanted. We risk embarking on a major experiment with the local environment in Lancashire, the South East, South Wales and Northern Ireland to get gas that won't solve our energy problems, which is unlikely to cut energy bills and which, by supporting the Chancellor's reckless dash for gas, will make it harder to meet our climate change targets.