Thursday 17th Aug 2017 - Logistics & Supply Chain

There’s tax in them thar supply chains

Extraction of shale gas has received a lot of bad publicity in the UK – with dire warnings of houses collapsing as a result of “fracking” – hydraulic fracturing of the rock layers to get at the gas.

Malory Davies FCILT, Editor.

Malory Davies FCILT, Editor.

The industry, not surprisingly argues that good management can eliminate these risks – and now it has produced new evidence of the financial benefits of shale gas extraction. It comes  just a couple of days ahead of the budget – strangely enough, it focuses on the tax benefit to the Treasury.

It comes in a report by the Onshore Energy Services Group suggesting that more than 35,000 could be employed in the supply chain by SMEs alone.

The paper which was presented to the UK Shale Gas and Oil Forum yesterday also suggests that these supply chain organisations could generate some £1.35 billion in taxes for the Treasury.

The risks and benefits of shale gas are highlighted by the US experience. There, it is estimated that fracking is now responsible for more than 40 per cent of oil production and almost 70 per cent of gas production and has been responsible for driving down the price of gas.

OESG chief executive Lee Petts said: “British SMEs in the existing onshore oil and gas supply chain have both the capabilities and the appetite to play a big role in making shale gas a truly British success story.

“If they could replicate the success of their aerospace counterparts and achieve 55 per cent of the prize predicted by EY last year, supply chain SMEs could one day be responsible for tens of thousands of jobs, with the workforce alone contributing a staggering £1.33 billion to the economy through their taxes at peak. Taxes on business profits could yield a further £0.02 billion.”

The OESG is calling on the Government to introduce a requirement for mandatory supply chain action plans, and to extend the Advanced Manufacturing Supply Chain Initiative to cover shale gas activities.

Will the Chancellor use the budget to support supply chain SMEs in this industry? We’ll know tomorrow.

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