Mr Osborne plans offer tax breaks for the shale gas industry, so that Britain is at the forefront "of the shale gas revolution”.
Ministers hope the controversial 'fracking' process, which involves pumping water, sand and chemicals into the ground to extract gas trapped in rocks, could unlock a major new source of gas for Britain and bring down household energy bills.
"This is a major new energy soucre that can reduce energy bills for families, for businesses, can benefit the local communities where the energy exists and create thousands of jobs," said Mr Osborne.
"This a real chance to get cheaper energy for Britain."
Fracking is fiercely opposed by some local communities who fear earthquakes, environmental damage and disruption.
The Telegraph's Science Correspondent Nick Collins said hopes of a cheap gas revolution may be wishful thinking, and the extent of UK shale gas reserves is still unclear.