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Britain plans tax breaks for shale gas investment

The British government unveiled what it described as the world's most generous incentives for shale gas on Friday, offering tax breaks to drive investment in a sector that has already transformed the US energy market. Finance minister George Osborne said the government wanted to create the right conditions in Britain for industry to unlock the potential of shale gas.

"This new tax regime, which I want to make the most generous for shale in the world, will contribute to that," he said. The government is looking to shale gas to reduce Britain's reliance on natural gas imports and hopes it will also lower consumers' energy bills. The British shale industry is still in its infancy, however. Experts say it is difficult to estimate how much shale could be developed commercially, and their estimates vary widely.

Utilities analyst Peter Atherton at Liberum Capital said the new tax allowance could attract more companies. "It (shale exploration and production) is a tough thing for industry to do, costing from tens to hundreds of millions of pounds, and with a fair amount of technical risk and reputational aggravation in the early years," he said. The proposed allowance for shale gas, subject to consultation for three months, would reduce the tax payable on income from shale production to 30 from 62 percent for oil and gas.

The tax break is based on existing allowances for oil and gas production aimed at supporting almost 14 billion pounds ($21 billion) of investment next year. Called the shale gas "pad" allowance, it would likely go into the finance bill next year and last for the lifetime of the shale well, a UK Treasury spokeswoman said. British exploration firms IGas and Cuadrilla are at the exploration stage in shale gas, while other energy firms such as France's Total are watching developments with interest. Shares in Alkane Energy PLC, which has extraction licences in the Bowland area, were up 4.6 percent at 40.4 pence at 1142 GMT, while IGas was 5.58 percent higher at 123 pence.

Copyright Reuters, 2013



 



 
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