Tax on shale gas profits slashed in bid to jump-start investment

Suzie Neuwirth
SHALE gas production was given a helping hand from the government yesterday, with the confirmation that taxes on companies’ profits would be slashed to spur investment.

Under the new regime, which covers all of the UK’s onshore oil and gas industry, including shale, the tax rate on a portion of a company’s profits will be cut from 62 per cent to 30 per cent.

The UK’s shale gas tax regime will be the most competitive in Europe and lower than the US, “making the UK an attractive, competitive opportunity for global operators,” the Autumn Statement said.

“The government is bending over backwards here, so it’s as good as it could get for a company drilling for shale gas in the UK,” Malcolm Graham-Wood, analyst at VSA Capital, told City A.M. “Shale gas explorers like Cuadrilla and IGas are due to start drilling in the next 18 months and if everything goes well, shale activity will soar in the UK.

“It will certainly reduce bills but it will take at least five years to trickle down, if not longer,” he warned.

Critics have argued that the UK is still technologically very far away from being able to capitalise on the potential of shale gas.

“One of the aims of the tax allowance is to get the larger operators to start investing in shale,” said Tom Cartwright, energy and tax specialist at Pinsent Masons.

“Oil and gas operators will get tax deductions across all their profits if they start to tap into shale. The government is hoping this will pay for technology advances.”