Powering the Northern Powerhouse
Myles Kitcher, Managing Director at Peel Gas
& Oil discusses the role that the energy sector will play in putting the
power in the Northern Powerhouse.
It has been over a year since Chancellor George Osborne
stood up in Manchester's Museum of Science and Industry and announced the
country's need for a "Northern Powerhouse". He spoke about how four
ingredients would drive rebalancing the economy – connectivity; science and innovation;
arts and culture; and devolution.
In the run up to the elections the question on everyone’s lips was
how the promise of a Northern Powerhouse would materialise. The first steps
were positive with the appointment of Jim O’Neill, as the Treasury’s Northern
Powerhouse commercial secretary and James Wharton as the Minister responsible
for its delivery.
The Chancellor also used his first speech after the election to
address the key investments planned for the north of England, in what he called
putting ‘the Power into the Northern Powerhouse’ however, one of the
vital ingredients of economic growth is being overlooked – where is the energy
going to come from to power the Northern Powerhouse?
The North of England was the source and inspiration of the industrial
revolution and the North West continues to be the industrial powerhouse of the
UK. The region has the largest manufacturing sector in the UK (339,000
employees, Q1 2015) which continues to rise. We are home to a number of energy
intensive industries – with chemical plants at INEOS and Growhow in Cheshire,
and major manufacturing operations in aerospace at BAE and car manufacturing at
Jaguar Land Rover in Merseyside.
With coal fired power stations set to close, such as Ferrybridge
in West Yorkshire, where will the energy come from to support our thriving
manufacturing sector? Energy is a fundamental ingredient to driving the
powerhouse yet it has been largely absent from the political rhetoric to date.
Identifying energy as one of the key ingredients for the northern
powerhouse would help to demonstrate the potential benefits it could bring to
the region. Not only will a thriving shale gas sector provide the fuel for
industry across the north but it brings its own economic benefits. Earlier this
year Peel Gas & Oil commissioned a report by AMION Consulting which looked
at the potential impact of shale gas development in the Bowland Shale area.
This demonstrated that developing a supply hub in the North West could see
Northern economies benefit from a £30 billion boost through capital spending
and deliver 13,000 jobs. A prosperous supply chain could be transformational in
driving the Northern Powerhouse economies, from cementing services and steel
supplies to water management and infrastructure.
The Chancellor has been showcasing more than £24 billion of
investment opportunities in the Northern Powerhouse, inviting Chinese companies
and investors to get involved in infrastructure projects such as the Atlantic
Gateway connecting the Port of Liverpool to the City of Manchester and the East
Leeds Orbital Route, which will unlock land for 5,000 new homes. With an
estimated £30 billion investment required in the Bowland area shale gas supply
chain up to 2048 there are huge investment opportunities in the gas sector.
However, investors need reassurances around delivery.
The Government has made a number of announcements designed to kick
start the shale industry. The first came in the Chancellor’s 2014 Autumn
Statement where Osborne set out his grand plan for the Northern Powerhouse.
This included proposals for a Sovereign Wealth Fund that would use tax
receipts from shale gas reserves in the North of England to invest in economic
development projects and regeneration in the north. Two world-class sub-surface
test centres were also announced - including one at Thornton Science Park in
Ince, Cheshire - as well as new tax allowances designed to support the delivery
of onshore projects.
One of the biggest barriers to shale gas development is the
planning system. In August, Secretary of State for Energy Amber Rudd announced
that shale (gas and oil) planning applications will be ‘fast-tracked’ through a
new, dedicated planning process. This process includes identifying
councils that repeatedly fail to determine oil and gas applications within the
16 week statutory timeframe, with subsequent applications potentially decided
by the Communities Secretary. Under these new arrangements a table setting out
local planning authority performance on speed of decision making, specifically
on onshore oil and gas applications, will be added to DCLG’s quarterly planning
application statistical release. Call-in powers are also to be amended to
specifically cover onshore oil and gas application appeals.
While these planning amendments are welcomed do they go far
Shale applications are unique and perhaps a more bespoke system is
needed reflecting development stages from exploration, appraisal and
development through to production? The industry should also be thinking more
strategically when it comes to well pad development to ensure that the benefits
for local communities are maximised.