Oil and gas production in the UK is in decline. Government projections forecast a decrease in oil and gas tax revenue of over 50 per cent from 2011-12 to 2016-17.
In this context, Deloitte UK analysis shows that the Bowland Basin shale gas production could generate tax revenues of around £580 million per annum by 2020. Deloitte UK’s analysis is based on Cuadrilla cost and volume assumptions for shale gas production and the Department of Energy and Climate Change central wholesale price assumptions.
Declining oil and gas production will also lead to a continued increase in imported gas to meet domestic demand. Under the National Grid Gone Green scenario, by 2020 some 69 per cent of total UK gas consumption will be imported, equivalent to 21.2 billion therms. Based on the Reference Case production assumptions, the Bowland Basin development, could offset around 14 per cent of this import requirement in 2020.
In addition, the development could support up to a peak employment of between 6,900 and 23,600 jobs. Deloitte UK estimates have been based on data from developed US shale gas fields.
Existing and proposed planning approval and business rate mechanisms will also create material local benefits from the Bowland Basin development. This is particularly the case if arrangements for shale gas business rates are introduced that are similar to those intended to be applied to renewable energy schemes. Under the highest profitability case for the Bowland Basin project, and using an assumed two per cent of revenue level for business rates, the local authority could receive in excess of £54.5 million per annum. This is equivalent to three per cent of the current Lancashire council budget or 13 per cent of the council tax charges to local residents.