The British government presented tax breaks for energy fracking companies on Friday to create the world's "most generous" regime for shale gas extraction.

Chancellor of the Exchequer George Osborne revealed plans to slash from 62 percent to 30 percent the tax on a proportion of production profits, in a bid to encourage shale exploration.

The Treasury believes that hydraulic fracturing, a controversial shale gas extraction method, could increase Britain's energy security, create thousands of jobs and boost tax revenues.

The government also believes the experience of the United States, which is seeing a shale gas boom, shows it could reduce energy imports -- which have reached record highs in Britain -- and bring down household fuel bills.

"Shale gas is a resource with huge potential to broaden the UK's energy mix," said Osborne.

"We want to create the right conditions for industry to explore and unlock that potential in a way that allows communities to share in the benefits.

"This new tax regime, which I want to make the most generous for shale in the world, will contribute to that.

"I want Britain to be a leader of the shale gas revolution -- because it has the potential to create thousands of jobs and keep energy bills low for millions of people."

Fracking involves using huge amounts of pressurised water mixed with chemicals to crack open shale -- sedimentary rock containing hydrocarbons -- to release natural gas.

Environmentalists have warned that the chemical-laced waste could be contaminating fresh water resources.

Despite the risks, the shale gas boom in the United States has resulted in a big drop in gas prices, helping to fuel economic recovery and shake up the petrochemical industry worldwide.

The government also plans to give local communities at fracking sites £100,000 ($150,000, 115,000 euros) for each well and one percent of revenues if it is commercially viable.

Following a short consultation period, the government will put the proposals before parliament.

Opposition Labour energy spokesman Tom Greatrex acknowledged that shale gas could help improve Britain's energy security.

But he added: "Announcing tax breaks before we know how much shale gas is actually recoverable, before anyone even has a licence to extract it, and before anyone even knows whether fracking needs tax incentives, makes no sense at all."

Andrew Pendleton, Friends of the Earth's campaigns chief, said: "Promising tax hand-outs to polluting energy firms that threaten our communities and environment, when everyone else is being told to tighten their belts, is a disgrace."

The European Union has no plans to impose a blanket ban on fracking, but it will lay out rules to address environmental concerns, EU environment chief Janez Potocnik told AFP on Tuesday.

The British policy contrasts with the line taken in France where exploration for shale oil and gas is not permitted because of the risks to the environment.

President Francois Hollande said this week that this policy would not change.

[Michael G McKinne /]