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Gas tax breaks lead to announcement of Centrica's new shallow water gas field
Centrica has today (26 July) announced plans to develop a new shallow water gas field in the North Sea in light of the government's decision (25 July) to extend significant tax breaks to the development of gas resources.
The gas and energy company has claimed that development of the Cygnus project, which will drill for gas in the southern North Sea, will create 4,000 new jobs and, at peak production, will generate approximately five per cent of the UK's total gas production.
Centrica’s announcement comes in the wake of the recent government response to the consultation on the Renewables Obligation Banding Review, which set support levels for renewable electricity technologies for the period 2013 to 2017 in the form of Renewables Obligation Certificates (ROC). The RO scheme requires UK energy providers to increase the amount of sustainable energy they provide, as part of an initiative to move the UK’s sustainable energy consumption to 15 per cent by 2020.
Controversially, the government’s announcement regarding the RO scheme saw tax breaks for gas-fuelled energy and cut or eliminated previously expected subsidies for renewable technologies such as anaerobic digestion.
“As the UK becomes increasingly dependent on imported gas, today’s announcement represents a significant boost to the UK’s long term energy security as well as creating much needed jobs", said Sam Laidlaw, Centrica's Chief Executive.
Reactions to the government's affirmation of support for the use of gas, alongside Centrica's announcement, are mixed.
Britain's General Union (GMB) welcomed Centrica's announcement, with GMB National Secretary Gary Smith saying "GMB welcomes the fact [the] government is facing up to the reality that gas is the UK fuel of the future and the creation of thousands of jobs by Centrica."
“It was always a nonsense to suggest that UK homes would be able to absorb the huge cost of installing gas heating and cooking whilst seeing their bills go up more than fourfold as a result. Gas is the fuel of the future and Centrica's announcement about investment in the sector is great news.”
Smith said, however, that ultimately, 'base load electricity', must be powered by nuclear energy.
"It is imperative [that the] government now breaks the logjam on new nuclear. We don't believe it is sensible to be burning vast amounts of gas to produce electricity. It is a waste. The role of producing base load energy must fall to nuclear", he said.
Many energy companies and environmental groups are expressing their dissent against the decision to give funding to gas.
The government has back tracked from 2010 commitments that would have seen a “huge increase in energy from waste through anaerobic digestion”, according to Charlotte Morton, Chief Executive of the Anaerobic Digestion Biogas Association (ADBA).
"Degression was to be expected but the new proposal to prevent the vast majority of new plants from claiming ROCs from April 2013 will cause a shock in the AD and investment communities”, Morton said.
"Making such a change with little more than six months’ notice will hit projects already in development, as well as the business plans of companies looking to develop AD plants in the next few years.
"A sudden announcement of a policy which was not part of the original consultation is completely contrary to providing certainty and clarity to businesses, which DECC has said that they want their policies to achieve”, she said.
Further information on the Cygnus project can be found on Centrica’s website.
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