UK shale gas wealth fund pay-out could total £1bn (in northern England)

Shale infographic from Energy InstituteA total of £1 billion could be paid out to local communities, charities and householders, according to the UK government’s newly-launched consultation on the need to explore the UK’s massive shale gas resources.

The British Geological Survey study of shale gas across the north of England estimated a total shale gas resource of 1,300 trillion cubic feet, which dwarves the current UK annual gas consumption of around 2.5 trillion cubic feet.

The industry will need to test how much of this gas can be extracted technically and economically. There is a clear possibility of a significant domestic contribution to meeting the UK’s future demand for gas.

The Treasury-led consultation states: “Having access to clean, safe and secure supplies of natural gas for years to come is a key requirement if the UK is to successfully transition to a low carbon economy.

“The government remains fully committed to the development and deployment of low carbon technologies for heat and electricity generation and to driving up energy efficiency, but we need gas – the cleanest of all fossil fuels – to support our climate change targets by providing flexibility whilst we do that and help us to reduce the use of high carbon coal.

“Gas provides around one third of our energy supply. It is used domestically, to cook and heat homes, as a fuel for electricity generation, and as a feed-stock by industry for the manufacture of many common products.

“Developing the UK shale industry could provide the UK with greater energy security by reducing our reliance on gas imports, as well as resulting in growth, jobs and tax revenues.

“A study by consultants EY has estimated a potential cumulative investment of £33 billion and the creation of up to 64,500 jobs as a result of a thriving shale industry. There are many significant opportunities for UK businesses identified in the same study.

“For example, a projected need for more than £2 billion worth of steel, a need for around 50 drilling rigs and for over £2 billion worth of sand.”

The Shale Wealth Fund will be new funding. It will not be used to replace existing government funding and it will be additional to any benefits provided by the onshore oil and gas industry through its community benefits package.

  • The consultation seeks to explore the following key issues:
  • What the government’s priorities should be for the Shale Wealth Fund
  • The allocation of funding from the Shale Wealth Fund to different stakeholder groups
  • The extent to which the industry community benefits scheme and the Shale Wealth Fund should be aligned
  • The potential delivery models for the Shale Wealth Fund – to ensure that households and communities benefit, and to decide how funds are spent, and how any process should be administered.

In Scotland, the minority SNP-government is awaiting the outcome of an independent scientific review of shale energy, which is due to report in Spring 2017 – after imposing a ‘temporary’ moratorium on fracking in Jan 2015.

A report by scientific experts commissioned by the Scottish Government in the previous parliament has already concluded that onshore shale gas exploration can be carried out safely.

Meanwhile, the first of the Dragon-class tankers carrying shale gas from the US is due to arrive in Scotland later this month. Grangemouth-refinery operator INEOS has built the ships to import the gas because of dwindling domestic supplies from the North Sea.

The deadline for replies to the consultation is 25 October 2016. Online responses can be submitted through:

Written responses should be sent to:

Energy Branch

HM Treasury

1 Horse Guards Road

London SW1A 2HQ

Or sent to:

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