The House of Commons Select Committee on Energy and Climate Change has published their inquiry report on shale gas. The committee suggests that production of shale gas in the UK could enhance energy security and tax revenues but are cautious about any downward effect on gas prices.
Uncertainty around UK production
The report points out that shale gas development in the UK faces a very different set of factors compared to the US. America now has some of the lowest gas prices due to its domestic shale gas production. The US shale gas sector benefits from federal subsidies, a favourable regulatory regime, low population density and mineral rights for landowners. The committee points out that the extent of recoverable resources in the UK is uncertain and it remains unclear what effect shale gas production will have on domestic and international prices.
On publication of the report Tim Yeo MP, Chairman of the Energy and Climate Change Committee, commented: ”It is still too soon to call whether shale gas will provide the silver bullet needed to solve our energy problems. Although the US shale gas has seen a dramatic fall in domestic gas prices, a similar ‘revolution’ here is not certain.”
“Ministers should be careful, though, not to base energy policy on an assumption that gas prices will fall in future as a result of shale gas production. Rising global demand for gas, particularly from Asia, could limit any potential price reductions.”
A successful shale gas industry in the UK will have to win over a sceptical public. DECC has established an Office of Unconventional Gas and Oil, which the Minister told us would play a role in, “dispelling some of the myths… and misinformation.”
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