Fracking 'unlikely to give UK cheap gas', report says

Cross-party group pours cold water on Osborne's hopes shale gas will solve energy problems

George Osborne's plan to deliver cheap energy by fostering a fracking revolution has been dealt a severe blow after an influential cross-party group of experts said any boom in shale gas production would be "unlikely to give the UK cheap gas".

A nine-month inquiry chaired by former energy minister Charles Hendry, concludes that it is far too early to estimate the volume of shale gas contained in UK rocks and harder still to know how much of that it will be commercially viable to extract.

Further complicating the picture, developers in densely populated Britain could find it difficult to secure planning permission to extract the gas, which is produced using the environmentally unpopular practice of hydraulic fracturing, or fracking.

But even if vast quantities of shale gas are eventually produced, the report finds that this would be unlikely to have much impact on household and businesses energy bills – although it would be good for the economy. "Despite the support for UK shale gas announced in the Chancellor's Budget, there remains a great uncertainty around the size of the prize and developments in the industry, which could take a decade and are unlikely to give the UK cheap gas," concluded the report by Carbon Connect, a steering group of industry and academic experts chaired jointly by Mr Hendry, a Conservative MP, and Baroness Worthington, Labour's Energy and Climate Change spokesperson in the House of Lords.

The findings contradict Mr Osborne's assertions in his Budget last month, when he announced generous tax breaks for fracking companies and hinted at financial incentives to persuade local communities to join the shale gas rush.

"I want Britain to tap into new sources of low-cost energy such as shale gas," said the Chancellor who has placed gas at the centre of Britain's power-generation strategy and wants to build up to 40 new gas-fired power stations in the UK.

A UK shale price boom will have little to no bearing on the energy price in this country, the report argues, because the gas can be exported through pipes to Europe where the prices are higher or by being frozen to 1/600th of its size and shipped further afield to Asia in the form of liquefied natural gas for an even higher price. As a result, the UK price is likely to rise at least to European levels.

Fracking releases the gas from the rocks by blasting a mixture of sand, chemicals and water into them. It has been linked to earth tremors and water pollution and was temporarily banned in the UK after causing two earthquakes in the Blackpool area.

But the ban was lifted in December after the Government concluded it was safe to frack under close supervision. Two days before the ban was lifted, David Cameron foreshadowed the decision, insisting that shale gas could bring down prices.

"We should take part in fracking because this might be a revolution and if we ignored it completely we could be giving our economy much higher energy prices than would otherwise be necessary," Mr Cameron said.

Cuadrilla, an energy firm backed chaired by former BP chief executive Lord Browne, is at present the only company fracking in the UK, although it is still at the exploration phase.