Govt announces new licence terms for shale gas drilling

 

Michael Fallon MP, Minister of State for Energy
Michael Fallon MP, Minister of State for Energy

The UK government has announced further measures to encourage shale gas recovery – at the same time as the Scot-Government announced new ‘buffer zones’ around any such proposed developments.

Michael Fallon, UK Energy Minister responsible for shale, told an industry conference: “There is cross party consensus on this issue – I welcome confirmation that the Labour Party will not oppose our plans in (the Westminster) Parliament.

“Our proposals ensure that safety remains at the heart of shale production – this does not change any other aspect of the existing regulatory system, such as procedures for surface access, planning or environmental permits, or safety controls. “

Although the UK has been extracting onshore gas for almost a century, the shale industry has some important differences. Unlike conventional oil and gas, shale is not concentrated in small high value fields but is likely to be dispersed across large areas with ‘sweet spots’.

Traditional petroleum licence terms do not reflect this. They limit the amount of acreage that can be retained beyond certain deadlines and impose fees to incentivise the voluntary surrender of acreage. This could undermine the exploitation of shale gas in the UK.

So Fallon announced the following new licence conditions for potential shale gas operators. He said: “I have taken steps to make licences fit for purpose whilst increasing public transparency about fracking. I am removing unnecessary barriers and introducing a new flexibility to licences that allow the retention of greater areas than before.

“This will replace inflexible rules with an improved approach based on a system of “Production Plans” which are part of the licensed area that is being used for production; and “Retention Agreements” which are areas with work plans agreed between DECC and the licensee.

“These changes will reduce costs to the licensee but they won’t lead to land-banking as plans for meaningful activity will have to be approved.

“We will also improve the transparency of information about the fracturing of shale and the flow rates achieved. It is important that everyone has access to this information earlier so I have decided that DECC will require licensees to submit reports about each well that involves the fracturing of shale, and that the confidentiality period for this information should be reduced from four years to just six months.”

The Minister said the benefits to the UK of using homegrown shale include:

  • Displacing a proportion of gas imports – increasing resilience and energy security.
  • Benefit in terms of jobs, tax revenues and growth, mitigating some of the falling revenues from the North Sea. EY’s recent supply chain report found that industry could support around 64,000 direct and induced jobs.
  • And control the carbon emissions created by production inside our carbon budgets.

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