The funding will be shared by 19 firms throughout the UK to develop new ideas in the extraction of shale oil and gas.
UK Minister for Business, Enterprise and Energy Matt Hancock said: "Unlocking the shale gas and oil that is deep underground is an opportunity to reduce carbon emissions, increase our energy security and create jobs.
"It must be done safely and securely, so supporting innovation in this sector is vital to help us seize this opportunity."
The funding will also support a range of projects, which include three separate initiatives for enhancing water treatment processes, new sensors to detect methane leaks while drilling and automated systems to guide exploratory drilling processes.
The fund will include £1m in contributions from the Department of Energy and Climate Change and an additional £250,000 from the Natural Environment Research Council.
Innovate UK head of energy Rob Saunders said: "Shale gas and oil could transform the energy sector in the UK, but for that to happen it’s vital that the public have confidence in the sustainability and above all, the safety of the industry.
"That’s where innovation plays its role and the companies that have won the very competitive process we have run here are bringing considerable expertise to tackling this problem."
