“We are keen to see exploration proceed quickly to validate current estimates and establish the true potential of shale gas in the UK.”

The Energy and Climate Change Select Committee has published a report “The Impact of Shale Gas on Energy Markets”. This follows the Committee’s previous report on shale gas published in May 2011 and reflects developments over the past 2 years. The Committee report is likely to be influential as it includes MPs from all of the major political parties.

The report criticises the length of time for which the moratorium on shale gas drilling was in place as it was “not necessary to take so long to establish the safety of fracking”. It gave “the impression that the case for and against proceeding with exploration is finely balanced when this is simply not the case”. The report explains that hydraulic fracturing is different from other new technologies as there is a volume of information from the USA. Had there been any serious consequences of its use these would have come to light. The report also highlights that the Committee has “previously concluded that the current regulatory framework is sufficient to allow exploration to proceed”.

Whilst the report considers that it is too early to predict the effect of shale gas on the UK, including its effect on gas prices, it highlights that should large recoverable reserves of shale gas be discovered in the UK this “will either bring down prices in the UK, or generate substantial tax revenues, or both”. It explains “it is impossible to determine reliable estimates of shale gas in the UK unless and until we have practical production experience”. The report confirms that for these reasons “the Government should encourage exploration to establish whether significant recoverable reserves exist” and considers that “if companies can demonstrate that they can meet the required standards the Government should encourage exploratory shale gas operations to proceed in order to improve current estimates”.

The previous recommendation is repeated that the Department of Energy and Climate Change encourage the development of the offshore shale gas industry. The report highlights that this should be done before the UK’s North Sea oil and gas platforms are decommissioned as otherwise the opportunity to utilise these may be lost.

The report supports the Government’s intention that communities will benefit from shale gas exploration in their local area and recommends that the Government explore ways of sharing substantial material benefits with local communities. The report also recommends that “if shale gas does prove to be plentiful and either cheap or yielding substantial tax revenues it would be sensible to put far more emphasis on developing CCS” (Carbon Capture and Storage).

The report provides strong backing for further shale gas exploration, and should be encouraging to the shale gas industry.

The report can be viewed here.