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The impact of shale gas tax breaks on the oil and gas sector

22-07-2013

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Chancellor George Osborne has announced plans for generous tax cuts to the UK's emerging shale gas industry. In a bid to 'unlock the potential' that fracking offers, Mr Osborne has suggested slashing taxes from 62 per cent to 30 per cent. 

His comments have unsurprisingly sparked a lot of debate, fracking being an extremely controversial topic at the moment, both within and outside the oil and gas industry.

What will the impact of this move be on the oil and gas sector? Here are a few possible effects:

More domestic energy resources

It is thought that the UK possesses vast shale gas resources which as yet have been practically unexplored - possibly twice as much as first estimated. If this gas could be extracted, it might have a significant effect on the amount of energy resources at the UK's disposal and lessen the quantities that would need to be imported. Consequently, this could provide more opportunities to the oil and gas sector.

UK 'most generous' fracking regime

Mr Osborne's tax cuts will, according to bbc.co.uk, position the UK as the nation with the most generous fracking regime. He hopes it will also make the UK a 'leader' in the field. This might therefore encourage more companies to invest or diversify into fracking. While this could offer up the aforementioned opportunities, it could also mean that competition across the sector would grow.

More jobs

Hand in hand with opportunities, diversification and investment come jobs. If the plans get the go-ahead and have their predicted effects, then there could be hundreds of additional vacancies in the industry as a whole, which is a great prospect. These new recruits will all require the relevant risk management training to ensure that the risk of an accident is kept to a minimum, thus demand for appropriate training will similarly increase.

The environmental angle and PR

Fracking has prompted huge outrage among environmentalists and campaigners. They warn it could in extreme cases cause earthquakes or pollute water supplies. If more people take this view, perhaps other methods of extraction might gain popularity (and funding?), especially the development of 'clean' energy alternatives. All the same, shale gas explorers, who insist that the practice is safe,  will have their work cut out gaining public support. It'll take quite a PR drive to turn current perceptions around. Knowledge that training has taken place around 'not cutting corners' and doing things properly might allay some fears.

Currently, there are only a handful of shale gas exploration companies and none of them have started to extract gas yet. Only time will tell what the true and long-lasting effects will be on the oil and gas industry.

Author: Elizabeth Smythe

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