Christopher Pincher is a member of the Energy and Climate Change Select Committee and the Member of Parliament for Tamworth
Today’s dual announcement on UK shale gas means that two more major pieces in the development jigsaw of this important national resource have fallen into place.
Total’s decision to invest $50m in British shale exploration – following Centrica and GDF Suez last year – is a significant confidence boost to an industry that up until now has been treated as a side-show, the energy equivalent of the 1916 Allied campaign in Salonika versus “big oil” drilling their Western Front in the North Sea. It puts real investor cash and skills behind the niche players, drawing in further backers, and will allow for the development of between 20-40 wells over the next couple of years. And that will help us determine just how much shale gas we have (initial surveys suggest deposits of up to 1.3 trillion cubic feet, but maybe more) and how easily extractable it is. Total’s announcement should be seen as a green light from conventional energy developers that the race for British shale gas is on.
Yet the Government’s timely release of its community pay back plans to encourage communities to exploit their own local assets is arguably even more significant. One of the biggest roadblocks to expanding their paltry number of exploratory wells that shale gas players such as Cuadrilla and iGas say they face is the worry of local communities sitting on top of shale deposits, and the reluctance of local authorities to work through the planning process. Time is money and long delays discourage exploration, as the professional protestors who go around the country opposing on-shore oil and gas drilling know full well. So a generous scheme to encourage local people to look upon their shale gas as their own valuable resource, and not a threat to their community, is essential to the rapid development of the industry to a scale where it can have a meaningful impact on job creation, tax revenues and, potentially, local energy prices.
So greater local benefit is crucial. The announcement that local councils will be able to keep all of the business rates from shale gas development, rather than half as they could do previously, is worth an estimated £1.7million for each 12 well site. And that is on top of the community investment each drilling company habitually makes in local causes near to its well sites and the one per cent of revenues from any well that the government has already promised communities. Quite rightly, it will be for local authorities, accountable to their local electorates, to decide how they use their business rates and I hope they discuss their proposals with the community. But, for example, that sort of cash could ensure a local council provides food waste collection weekly rather than twice monthly, keeps the local library open or subsidises swimming. It can be used for almost anything.
In the US, where its massive shale gas reserves have driven its energy revolution and held down power prices, American firms have used the cost advantage to fight more effectively in the battle of trade. JP Morgan is reporting that US growth is now tracking ahead of expectations as the trade deficit fell by $5billion between October and November 2013. That improvement in their trade position is down in no small part to the much lower energy costs US firms have to bear when competing to sell their goods on the open market. The determined exploitation of UK reserves could also have a real impact on our own economy. True we do not have the vast quantities of shale gas enjoyed by the US nor are we a closed energy market but there is no doubt that additional and home grown gas could help insulate British consumers from energy price spikes and give British firms a sharper competitive edge. Also, importantly, the development of a shale gas industry supporting up to 74,000 British jobs and contributing billions of pounds to the Exchequer could help to finance tax cuts, socially desirable spending on sensible infrastructure, or contribute towards innovations such as a British Sovereign Wealth Fund.
So we should welcome today’s two important announcements, and give our backing to the opportunities offered by British shale. As a young kid I remember watching TV as Tony Benn, the then Energy Secretary, turned a huge wheel to switch on a new oil field in the North Sea. It was presented by the BBC as a moment of pride and celebration. A generation later we seem to have mislaid that sense of national achievement. We must find it again and quickly. The fact that foreign firms like Total signal confidence in the UK coupled with the determination of the government to ensure local communities win a real stake in the energy wealth beneath their feet, should motivate us all back British shale gas. The spirit of Benn and 1975 should be rekindled.