UK: Energy Update - 27 March 2013

Last Updated: 9 April 2013
Article by David Wilkinson

The Enthusisasm for Shale Gas continues to grow

The Chancellor has certainly caught the shale bug.  In the Budget he announced that shale gas was "part of the future” and that the Government “will make it happen”.

As trailed back in the 2012 Autumn Statement, the Government will consult over the course of the year on measures to promote investment in the exploration and production of shale gas.   The consultation will include proposals for a new shale gas field tax allowance (to reduce the effective tax rate on shale gas production) and the extension of the Ring Fence Expenditure Supplement from 6 to 10 years.  The plan is to consult over this summer and to implement legislation as part of Finance Bill 2014.

In the budget the Chancellor also focused on some of the planning issues and the need to ensure that local communities benefit.

This is a topical area.  For comment on the Budget click here.  For comment on some of the real estate issues associated with fracking click here.

Industry is Delighted with George Osborne's comment on Shale

Cuadrilla commented: "Cuadrilla warmly welcomes today’s Budget announcements concerning shale gas…the Government’s decision to introduce tax reforms for shale gas will greatly incentivise companies such as Cuadrilla that are undertaking and investing in exploration work….We also support the Government’s decision to accelerate the provision of planning guidance for local authorities. The country needs to move forward with vital exploration activities, so we can begin establishing the value of our significant onshore gas resources."

Lord Browne, Chairman of Cuadrilla and former BP Chief executive, said "Now this is the moment – this is where our future lies, this is where we have to get infrastructure
(built). As a nation, we are searching for our future – our source of competitive advantage. I feel very strongly we should not discard this advantage. We did the North Sea very well. This nation can do extraordinary things."

Estimates of how much shale gas there is in the UK vary widely, but it could amount to trillions of cubic feet of gas. If Cuadrilla is successful liberating gas from dense shale rocks and piping it to the surface there is potential for considerable profit stretching into the billions for decades to come.

For further comments from an interview with Lord Browne please click here and for Cuadrilla's comments on the Budget please click here.

Gas Storage – Will its time come?

On 15th March, FFW hosted a lunch for those with an interest in gas storage to consider some of the challenges being experienced by those looking to develop gas storage in the UK and the challenges for this which are created by increasing regulation and the lack of consistency across regulators.  The lunch provoked lively debate between those who thought government needs to do more to promote storage and those who believe that it would be better to let the market operate with minimal regulation.  This was a timely debate, bearing in mind the impact of the cold spell last week and supply difficulties which saw gas prices for same day delivery spike at 150p a therm.

The press are now increasingly focusing on the inadequacies of Britain's gas storage capabilities and even speculating about the possibilities of Britain's gas supplies running out and industrial users being paid to scale back usage.

We wait with interest to hear what the government says in its promised statement on storage.

German Gas Suppliers and Unfair Terms in Consumer Contracts

Consumer contracts with gas suppliers were recently tested for unfair terms in  Germany. The questions for the courts was whether a German gas supplier had the right to unilaterally amend the price charged to its customers when those customers are on a special tariff. The ECJ found that unilaterally changing the price charged to consumer could be in breach of the law. Further, the ECJ dismissed applications for a limit on the financial effects of acting in an unfair way.  German gas suppliers in breach of this could now have to reimburse consumers.

Please click here for FFW's summary of the judgment and potential effects.

Ofgem Consultation for New Regulatory regime for Electricity Interconnector between GB and Belgium

Following the European Commission's decision on BritNed (where the Commission imposed additional conditions on the exemption decision), the Ofgem consultation paper notes that developers may perceive the BritNed decision as an indication that the Commission sees exemptions as exceptions. Ofgem therefore saw a need to develop a regime that offers a predictable and stable framework within which investment in interconnectors can be made. Ofgem proposed regime is of a 20 or 25 year duration, with the levels of the cap and floor, flat in real terms, being set ex-ante and remaining fixed for the regime duration.

For a link to the consultation paper click here

Smart Meters – A force for good but with legal traps

A number of the FFW Energy Team attended the Future of Utilities conference in London last week.  A key discussion point was how smart meters provide utility companies with a way to get closer to their customers both to better promote their services and to help to promote energy efficiency.  This is definitely the way things will go.  However, the introduction of smart meters raises numerous data protection and privacy issues.  Click here for and overview of issues in this area

Ofgem Publishes Effect Of Regulation On Wholesaling

On 15 March 2013, Ofgem published an open letter outlining the effect of the Regulation on wholesale energy market integrity and transparency (REMIT) on market participants and other stakeholders. The open letter also asks questions on a range of issues related to the implementation and application of REMIT in Great Britain. These include for example, requirements of the registration process, use of transparency platform, and the threshold for inside information disclosure.

For a link to the open letter click here

Recovering VAT on fees on M&A transactions  - think before you start

With M&A activity holding up well in the energy sector, buyers need to remember to think about their ability to recover VAT on fees incurred.  Although not in the energy sector, BAA's recent loss in the Court of Appeal helps point the way as to the steps which need to be thought about early on in a transaction.   

Please click here for FFW's commentary on the case.

Energy Demand to Rise by One Third by 2040 and Electricity the Future Dominant Energy Consumed

ExxonMobil, the supermajor, has published it's findings in relation to energy demand, supply and emissions to 2040. The report states that: that energy greenhouse gases will plateau in 2030 and then fall; demand for energy between 2010 and 2040 will rise by one third; that oil demand will grow, albeit comparatively modestly due to fuel efficiency and non-oil transport fuels; and that electricity will be the future dominant form of energy consumed.  It is interesting to compare the ExxonMobil projections with BP's projections which were published in January 2013.

Click here for a link to the ExxonMobil projections and here for a link to BP's

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.