Contractors could benefit from up to £3.7bn in new investment each year into shale gas development across the UK, potentially generating 74,000 new jobs and contracts.
A new Institute of Directors (IoD) report, Getting shale gas working, highlights many core contracting disciplines as those most likely to benefit, such as “geologists, engineers, construction workers, business analysts….and public relations staff”.
“Shale gas could be a new North Sea for Britain, creating tens of thousands of jobs, supporting our manufacturers and reducing gas imports,” notes the report’s author, the IoD’s senior economic adviser, Corin Taylor.
Further contracts will be generated throughout the shale gas supply chain, which includes contractor clients such as “cement and steel manufacturers, equipment manufacturers, drilling services companies and water treatment specialists”.
The boost to contractors working in the wider manufacturing sector could also be considerable. The report cites the experience in the United States, where analyses by PricewaterhouseCoopers (PwC) and Citi “estimate that at least one million new manufacturing jobs could be created over the next decade”.
With marginal rates of tax as high as 62%, a vibrant shale gas industry would also make a considerable contribution to the Exchequer, particularly welcome as declining North Sea production is generating an ever increasing tax gap.
Fresh revenues from shale gas could indirectly benefit contractors, who may find themselves under less pressure from an HMRC relieved of its focus on extracting additional tax yields from any source, and at any price.
However, the report warns that major barriers must be overcome for the benefits of shale gas to be realised. Poorly coordinated government strategy and guidance, combined with multiple bureaucratic barriers, including a draconian planning and permitting regime, are the barriers that must be navigated before contractors, and the wider economy, enjoy the full benefits.
“Further exploration will be needed to assess the size of technically and commercially recoverable resources,” notes Taylor. “At the same time, partnerships need to be established between industry, government and communities to ensure that development of this vital national resource benefits local people.”