UK: What shale can bring to the Northern Powerhouse

UK, Angel of The North
Source: DollarPhotoClub

Peel Gas & Oil is a shale gas and oil strategic development partner working alongside current and prospective onshore licence holders. Myles Kitcher, Managing Director at Peel Gas & Oil, explores the role of energy in the Northern Powerhouse.

It has been over a year since Chancellor George Osborne stood up in Manchester’s Museum of Science and Industry and announced the country’s need for a “Northern Powerhouse”. He spoke about how four ingredients would drive rebalancing the economy – connectivity; science and innovation; arts and culture; and devolution.

In the run-up to the elections, the question on everyone’s lips was how the promise of a Northern Powerhouse would materialise. The first steps were positive with the appointment of Jim O’Neill, as the Treasury’s Northern Powerhouse commercial secretary and James Wharton as the Minister responsible for its delivery.

The Chancellor also used his first speech after the election to address the key investments planned for the north of England, in what he called putting the Power into the Northern Powerhouse. However, one of the vital ingredients of economic growth is being overlooked – where is the energy going to come from to power the Northern Powerhouse?

The North of England was the source and inspiration of the industrial revolution and the North West continues to be the industrial powerhouse of the UK. The region has the largest manufacturing sector in the UK (339,000 employees, Q1 2015) which continues to rise. We are home to a number of energy intensive industries – with chemical plants at INEOS and Growhow in Cheshire, and major manufacturing operations in aerospace at BAE and car manufacturing at Jaguar Land Rover in Merseyside.

With coal-fired power stations set to close, such as Ferrybridge in West Yorkshire, where will the energy come from to support our thriving manufacturing sector? Energy is a fundamental ingredient to driving the powerhouse yet it has been largely absent from the political rhetoric to date.

Identifying energy as one of the key ingredients for the northern powerhouse would help to demonstrate the potential benefits it could bring to the region. Not only will a thriving shale gas sector provide the fuel for industry across the north but it brings its own economic benefits.

Earlier this year Peel Gas & Oil commissioned a report by AMION Consulting which looked at the potential impact of shale gas development in the Bowland Shale area. This demonstrated that developing a supply hub in the North West could see Northern economies benefit from a £30-billion boost through capital spending and deliver 13,000 jobs. A prosperous supply chain could be transformational in driving the Northern Powerhouse economies, from cementing services and steel supplies to water management and infrastructure.

The Chancellor has been showcasing more than £24 billion of investment opportunities in the Northern Powerhouse, inviting Chinese companies and investors to get involved in infrastructure projects such as the Atlantic Gateway connecting the Port of Liverpool to the City of Manchester and the East Leeds Orbital Route, which will unlock land for 5,000 new homes. With an estimated £30 billion investment required in the Bowland area shale gas supply chain up to 2048, there are huge investment opportunities in the gas sector. However, investors need reassurances around delivery.

The Government has made a number of announcements designed to kick start the shale industry. The first came in the Chancellor’s 2014 Autumn Statement where Osborne set out his grand plan for the Northern Powerhouse. This included proposals for a Sovereign Wealth Fund that would use tax receipts from shale gas reserves in the North of England to invest in economic development projects and regeneration in the north. Two world-class sub-surface test centres were also announced – including one at Thornton Science Park in Ince, Cheshire – as well as new tax allowances designed to support the delivery of onshore projects.

One of the biggest barriers to shale gas development is the planning system. In August, Secretary of State for Energy Amber Rudd announced that shale (gas and oil) planning applications will be ‘fast-tracked’ through a new, dedicated planning process. This process includes identifying councils that repeatedly fail to determine oil and gas applications within the 16-week statutory timeframe, with subsequent applications potentially decided by the Communities Secretary. Under these new arrangements a table setting out local planning authority performance on speed of decision-making, specifically on onshore oil and gas applications, will be added to DCLG’s quarterly planning application statistical release. Call-in powers are also to be amended to specifically cover onshore oil and gas application appeals.

While these planning amendments are welcomed do they go far enough?
Shale applications are unique and perhaps a more bespoke system is needed reflecting development stages from exploration, appraisal and development through to production? The industry should also be thinking more strategically when it comes to well pad development to ensure that the benefits for local communities are maximised.

Partnering with operators, Peel Gas & Oil can facilitate and de-risk the complex interactions with all interested parties from land acquisition to completion. We are well placed to support the sector, drawing on the Peel Group’s diverse experience and track record. We will fund and deliver consented well pads and can facilitate the infrastructure required to support the industry.

Myles Kitcher will be exploring these issues in a panel discussion on 15th October and a speaking slot on 16th October at the ESGOS conference.

This is a guest-post from our partners; Charles Maxwell Events.

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