Cuadrilla Welcomes, But Renewable and Environmental Sectors Unhappy with UK Gas Strategy

There has been a mixed reaction to the UK Government’s announcement of a new Office for Unconventional Gas and Oil.

Trailed in the Autumn Statement package of Chancellor George Osborne, the new Office will act as regulator for extractive companies, including those in the emerging shale gas sector.

The OUGO is given more space in the Gas Generation Strategy published yesterday by the Department for Energy and Climate Change, and described in a statement by Energy Minister Ed Davey.  Although Osborne was measured in his fleeting reference to unconventionals in his speech, the coalition government’s energy attitude has been characterized as a “dash for gas” in some quarters.

But it was welcomed by the CEO of Britain's best-known shale gas company, Cuadrilla Resources. Francis Egan said: 'We welcome the Government’s initiative to help the emerging shale gas industry get established. Exploration is necessary to have a better understanding about how shale gas can be developed safely and sensibly from the Bowland Basin. Costs in a technology industry such as ours will be higher at the outset, but will reduce over time as the industry grows."

Egan also supported the notion of the OUGO. "In the UK, our activities fully comply with one of the world’s tightest regulatory systems for oil and gas. We welcome any initiative that streamlines decision-making processes while ensuring that all shale gas extraction conforms to the highest environmental and health and safety standards."

The DECC is due to announce next week whether Cuadrilla’s operations can restart after two minor earthquakes in Lancashire caused a moratorium to be enforced last year. 

Andrew Raingold, executive director of the Aldersgate Group alliance of leaders from business, politics and society supporting a sustainable economy, said: "Investors who heaved a sigh of relief with the publication of the Energy Bill last week will now be thrown back into a state of confusion about the UK's energy future."

Osborne said the gas strategy would “ensure we make the best use of lower cost gas power, including new sources of gas under the land”. In his speech to the House of Commons, he did not mention hydraulic fracturing or use the word “fracking” which is a red rag to many environmental and community groups. He said the Office for Unconventional Gas would make sure regulation was “safe but simple”.

Obliquely referring to the shale gas adoption in the United States, he said: "We don’t want British families and businesses to be left behind as gas prices tumble on the other side of the Atlantic.”

A spokesman for the Institution of Mechanical Engineers, Tim Fox, said plans for the OUGO was a positive move. "Fuels like shale gas and coal-bed methane could play a useful role in meeting energy demand, as well as having the potential to create thousands of high-skilled engineering jobs and export services over the next decade," he said in a statement.

However he said his organisation believed it important that the UK did not become over-reliant on gas. "The UK’s off-shore gas reserves are dwindling, and given that the contribution of shale gas will probably be limited to a few percent of future UK demand, we are unlikely to ever be self-sufficient in gas."

RenewableUK, the body representing the wind and marine energy industry, pointed to positive elements in the Autumn Statement, but warned key uncertainties remain on Britain's energy mix.

“Based on what the Government has announced today, decisions on gas depend on what happens in 2014, and decarbonisation in 2030 depends on what happens in 2016 – so it feels like a lot of the important pieces are still in play,” said RenewableUK’s chief executive, Maria McCaffery, in a statement.

Nick Molho, head of energy policy at World Wildlife Fund-UK, said: "The UK’s over-reliance on gas is, environmentally and economically, highly risky. Gas price rises have driven people’s bills up in recent years so committing the UK to more gas seems to show a reckless disregard for both bill payers and the environmental impact of burning yet more fossil fuels."

Greenpeace political director Joss Garman said Osborne was misleading the country with regard to shale gas. "The impact of fracking in the US is irrelevant because energy experts say the US shale gas boom cannot be replicated here," he said. Over a third of the UK’s economic growth in the last year came from the low carbon sector. By ignoring this and instead offering incentives to the gas industry, George Osborne is undermining crucial green growth."

Meanwhile a poll taken this week by leading survey group YouGov showed 57% of respondents said they would feel more positive towards a political committed to the majority of the UK’s electricity coming from renewable sources by 2030.