Britain confirms tax breaks for shale gas

LONDON, Dec 5 (Reuters) - Britain's finance minister George Osborne confirmed tax breaks for shale gas on Thursday, as part of government efforts to stimulate new domestic energy sources following a boost in support for offshore wind farms earlier in the week.

The tax allowance, first announced in July, will reduce the tax payable on profits from shale gas, a form of gas produced by pumping chemicals and water into rocks, to 30 percent from 62 percent.

The shale gas tax break follows a series of announcements by the government on energy in recent days as part of Britain's twice-yearly budget statement.

The government had already unveiled plans to help cut energy bills, invest in new power stations and boost support for offshore wind farms while slightly reducing subsidies for wind parks built on land and large-scale solar plants.

Geological studies show Britain to have large shale reserves which could reverse a rising dependency on energy imports, but it is not yet known whether the deposits are economic as gas has not yet been proved to flow from the rocks.

The industry body for Britain's shale industry, the UK Onshore Operators Group, said the new tax framework gave "a strong signal" that the country wanted to incentivise investment in the industry.

Soaring energy bills have become a big political issue in Britain since Labour leader Ed Miliband said in September he would freeze consumer bills for 20 months if he wins power.

The government, under pressure to bring down rising consumer energy costs, has thrown its weight behind shale gas which the Prime Minister has said could bring down bills and create tens of thousands of jobs.

Shale gas, which has helped transform the U.S. energy market, is gas trapped in dense rock formations and retrieved via hydraulic fracturing or fracking - the pumping of water and chemicals into the ground.

The process has attracted protests from environmental campaigners in Britain who fear it can pollute water supplies and cause earthquakes.

Three companies are leading the charge to develop Britain's shale gas resources. Australia's Dart Energy, which is partnered with GDF Suez (TLO: GAZ-U.TI - news) , London-listed IGas Energy (LSE: IGAS.L - news) and Cuadrilla, a privately owned business partnered with British utility Centrica (LSE: CNA.L - news) .