UK government proposes shale sovereign wealth fund to benefit the North

UK, Angel of The North
Source: DollarPhotoClub

In the latest bid to gain the public’s support for shale gas exploration, the UK government unveiled plans for a sovereign wealth fund to be set up with revenues raised from shale gas.

Speaking on Monday, Chancellor George Osborne suggested the money could be targeted at the north of England, where much of the planned shale exploration is expected to take place.

“You could create a sovereign wealth fund for the money that comes from the shale gas that we’re going to be pulling out of the ground, particularly in the north of England,” Osborne told BBC Radio 4’s Today programme on Saturday. “That’s a way of making sure this money is not squandered on day-to-day spending but invested in the long-term economic health of the north to create jobs and investment there.”

Britain’s energy ministry said on Saturday that a shale gas fund would ensure other generations would benefit from the commercial production of shale gas.

“With the sovereign wealth fund everyone in the community will benefit, adding to known wider benefits of shale, such as increased tax revenues, growth and jobs,” said Energy and Business Minister Matthew Hancock in a statement.

Predictably, the government’s initiative angered environmentalists who called it “a desperate attempt to win over communities”, arguing that shale gas exploration will exacerbate climate change and pollute air and water.

“A far better solution for the northern economy is to invest in renewables and energy efficiency, which could create thousands of new jobs for the region and tackle climate change at the same time,” Helen Rimmer of Friends of the Earth told the BBC.

A Department of Energy and Climate Change (DECC) spokeswoman confirmed that the benefits of the fund will be added on top of the already promised lump sum of £100,000 for each test well – paid to the communities – plus one per cent of revenues generated from the site by shale gas developers. It is not yet known what size the fund will assume as it will depend of the amount of recovered resources.

With exploration still at a very early stage, the exact potential of UK shale gas is unknown. In 2010, the British Geological Survey (BGS) estimated the potential at some 150 billion cubic metres (bcm). A study for the US Energy Information Administration (EIA) puts it at 740 bcm.

Similarly, the exact scale of support for UK shale gas exploration is difficult to asses. A YouGov survey conducted in May this year showed that support for shale gas slumped from an all-time high of 58 per cent in July 2012, to just 49.7 per cent. Another survey in August – this time commissioned by UK Onshore Oil and Gas (UKOOG) has found that 57 percent of Britons think shale gas production should go ahead.

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