But the demand for sweeteners to help overcome opposition to fracking came as one of the world's leading insurance groups warned that those drilling in shale areas, deep waters or the Arctic risked "company-killing" reputational and environmental damage.

The energy and climate change committee says on Friday that substantial incentives would be needed to overcome local opposition to shale gas drilling, which has been associated with water, ground and air pollution in the US, and which green groups say is incompatible with moving to a low-carbon energy supply. The MPs also warn that, even if fracking does take place on a wide scale in Britain, there is no guarantee it will lower energy bills.

Tim Yeo, chairman of the committee, said: "We believe the UK's shale resources should be exploited, but that looks difficult given local opposition to drilling. There has to be a way of getting to communities."

He warned, however, that the government should not set too much store by shale gas when formulating its energy policies, because it might not have the positive impact that some have claimed for it. "We shouldn't base energy policy on the supposition that we have 50 years' worth of this gas to exploit. Some people seem to think shale gas is in the bag, that it is the answer to our energy problems, but it would be very rash to make that judgement now. We don't know enough about it."

Yeo said that shale gas might not have much of an impact on UK gas prices, because of soaring demand for fuel in Asia, which would drive up prices across the board. He said it was unlikely that the UK could become self-sufficient in gas, which is becoming the case in the US thanks to the shale gas boom there.

The incentives that could be made available to communities must be substantial, Yeo said, if opposition was to be overcome. "It's not just a question of building a new car park or a bypass. It might be cash incentives, and it might have to be very local – not to a borough council but to individual villages near the sites."

The committee's central recommendation of incentives for communities to be paid for by drilling companies is at odds with the views of Cuadrilla, the only shale gas fracking company in Britain. Papers seen by the Guardian under the Freedom of Information Act show the company has written to ministers calling for taxpayers to foot the bill for incentives.

Francis Egan, chief executive of Cuadrilla, said: "I'm delighted with the committee's central conclusion that exploration companies like Cuadrilla should receive strong support from the government to get on and drill, in order to establish the extent of the recoverable resources of natural gas. We agree with the committee's conclusion that substantial recoverable shale gas could limit future UK energy price rises, reduce our reliance on imported gas and generate considerable tax revenues." He pledged "strong community engagement" to areas where drilling is licensed to go ahead.

But green groups said the committee had not made a strong case for fracking. Friends of the Earth energy campaigner Tony Bosworth said: "This report does little to back the case for a UK shale gas revolution … Fracking is dirty, unnecessary and a threat to our climate and environment – it's little wonder so many communities are in opposition."

Leila Deen of Greenpeace said: "This report confirms that what we know about UK shale gas is that we don't know much.The only thing most experts agree on is that it won't reduce bills.

"Fracking remains a fantasy and a dangerous distraction from renewables, which continue to fall in cost. The government needs to start backing energy winners, instead of gambling with consumers' pockets and the climate."

Meanwhile, global insurance broker Marsh said that shale was one of the new frontiers for oil and gas companies which offered substantial rewards but also significant reputational risks if anything went wrong.

Andrew George, chairman of Marsh's energy practice, said the chances of an accident were not high but the stakes had never been higher, whether it was fracking for shale, drilling deep-water wells or working in the Arctic. "Reputational risk must be factored in much, much more. In the internet age a well can blow out in the morning and a company's survival could be at stake in the afternoon."

This meant insurers had to offer the right products, but also that exploration companies had to recognise the scale of the new risks and insure themselves accordingly. Asked whether some were failing to do this, he would only say: "Different kinds of buyers [oil companies] have different levels of sophistication."

In a statement ahead of a new report – Managing Risk on the New Frontiers of Energy Exploration – Marsh said oil and gas companies had the capacity to blow off course the whole global economy by getting into trouble.

It said one single accident could trigger a wider drilling ban or financially sink a business: "While the global energy sector is playing an increasingly pivotal role in stimulating economic recovery, the industry's failure to mitigate the risks associated with the new frontiers in exploration and production could jeopardise future growth."