UK could lose petrochemical industry if shale development slow - report

LONDON Thu May 8, 2014 1:03am BST

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LONDON (Reuters) - Britain could lose energy-intensive industries such as petrochemicals to regions with lower energy costs such as the United States and Middle East if it does not speed up shale gas extraction, a parliamentary report said.

Britain is in the early stages of extracting shale gas resources to lower its dependence on energy imports, and the government has promised favourable tax terms to companies looking for the unconventional gas.

Progress has been slow, however, due to public opposition to hydraulic fracturing - the process of injecting water and chemicals at high pressure into underground rock formations to push out gas - and stringent environmental regulation.

Critics say fracking can pollute water supplies and trigger small earthquakes. Advocates say it has a strong safety record and point to countries like the United States, where fracking has driven down energy prices and put them on the path to energy independence.

"If the UK does not develop its shale resources in a timely fashion, it runs a serious risk of losing the energy intensive and petrochemical industries which depend on competitively-priced energy and raw materials," the House of Lords Economic Affairs Committee said in a report published on Thursday.

Representatives of energy-intensive industrial users interviewed by the committee said they were facing a competitive disadvantage in comparison with peers in other parts of the world who pay a third less for their energy use.

"The cost of energy in the UK is three times that in the U.S. and three times that in the Middle East. They are our two major competitors for the manufacture of petrochemicals," Tom Crotty, director at chemicals manufacturer INEOS, said in his statement to the committee.

The development of shale gas will give petrochemical industries local access to gases needed in the manufacturing process at a lower price, Crotty added.

Energy-intensive industries employ around 250,000 people in Britain, making them a significant employer.

The House of Lords committee recommended the government should amend existing legislation to speed up subsurface drilling for shale gas.

Under current law, landowners need to give permission for companies to drill below their land although they do not own rights to the minerals their land contains.

This has slowed down shale gas planning and the government said it was already considering how to address this issue.

Environmental group Greenpeace says shale gas fracking pollutes groundwater and condemned the committee's report.

"On one page the Lords are saying public concerns should be taken seriously, on the other they urge the government to strip people of their right to say no to fracking firms planning to drill under their homes," said Greenpeace UK chief scientist Doug Parr.

(Reporting by Karolin Schaps; editing by Susan Thomas)

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