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Government unveils tax breaks for UK shale

Government slashes tax rates to encourage US-style shale gas boom. Share prices of producers move ahead strongly

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UK shale gas producers will receive significant tax breaks under proposals unveiled by the government today.

Chancellor George Osborne said: “I want Britain to be a leader of the shale-gas revolution because it has the potential to create thousands of jobs and keep energy bills low for millions of people,” 

In a move to replicate the US shale gas boom, the Treasury has proposed a new allowance that would lower the tax on revenues from shale to 30% from 62%.

To help to offset local opposition to the fracking process used to produce shale gas, the government confirmed that producers will have to provide at least £100,000 in community benefits for every fracked well and hand out at least one per cent of output revenue to locals.

The possibility of an outbreak of fracking to unlock the UK’s shale gas potential has already sparked controversy and environmentalists were quick  to condemn the tax change.

Water UK, the trade  body for the water industry, expressed its concerns about the impact on water supplies and wants talks with the shale gas companies to discus how fracking will be carried out in the UK.

Fracking, which involves pumping water , sand and chemicals into rocks to release trapped gas, has transformed the US energy industry with consumer prices plummeting and the US moving from an oil and gas importer to an exporter.

A recent report by the British Geological Survey suggested Britain’s shale gas reserves could supply the country’s needs for the next forty years even if only a fraction of the potential is tapped.

Osborne said: "Shale gas is a resource with huge potential to broaden the UK's energy mix. 

Shares in two listed companies have significant shale acreage in the UK: AIM-quoted IGas (LON:IGAS), and Dart Energy(ASX:DTE) and both rose strongly today.

IGas climbed 7.4% to 125.1p and Dart Energy gained 15% to 11.5c.

Privately-owned Cuadrilla is the only company so far to have drilled for the unconventional gas in the UK. It recently signed a US$160mln deal with British Gas owner Centrica to explore the Bowland shale area in the north west of England.

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Price: 49.75 GBX

AIM:IGAS
Market: AIM
Market Cap: £60.83 m
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