French oil giant Total to invest in UK shale gas

 

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French oil and gas company Total will invest at least $21m (£12.7m) in the UK's shale gas industry.

UK energy firm IGas Energy said it had agreed a deal to hand Total a 40% interest in two shale gas exploration licences in Lincolnshire.

The investment makes Total the first of the so-called "oil majors" to invest in shale gas in the UK.

Total will pay $1.6m in back costs and fund a work programme of up to $46.5m, with a $19.5m minimum commitment.

"The entry of the first major into UK shale gas licences is a further endorsement of the potential that exits... and demonstrates strong support for our operating capability," said IGas Energy chief executive Andrew Austin.

Pressure

Total's senior vice president for Northern Europe Patrice de Vivies said the deal marked an "important milestone" in a "promising onshore play".

The British Geological Survey estimates there may be 1,300 trillion cubic feet of shale gas present in the north of England.

But the process to extract shale gas - called "fracking" - has proved controversial.

Fracking - short for "hydraulic fracturing" - involves drilling deep underground and releasing a high-pressure mix of water, sand and chemicals to crack rocks and release gas stored inside.

Analysis

That Total is now getting involved in the UK shale gas industry is not insignificant.

The oil majors (BP, Shell, Total, Exxon, and Chevron) waited in the wings for five years in the US while smaller exploration companies drilled for shale gas.

When it became clear there were major commercial flows in America, then the majors piled in.

Now it looks like the majors are getting interested in Britain at a very early stage - thanks in no small part to the confident reserve estimates from the British Geological Survey and the open arms of the UK government.

The large energy players bring deep pockets and serious expertise with them and will be able to extract, sell and distribute any found gas quicker than smaller companies.

The advantage for the consumer could also be mouth watering - US energy costs are now a third of those in Europe.

If Britain can extract 10% of the estimated reserves it could supply the entire country for almost 50 years.

Total's move comes as the government is expected to introduce more incentives to encourage local authorities to allow drilling for shale gas, according to environmental campaigners Greenpeace.

Under the measures, local authorities would keep all income from business rates paid by companies drilling for shale gas, instead of giving it to the UK treasury.

In December, a report commissioned by the Department of Energy and Climate Change (DECC), said more than half of the UK could be suitable for fracking.

Protests

The process has attracted anti-fracking protests in the UK, with environmentalists fearing the technique could cause small earth tremors, water contamination and environmental damage.

But the BBC's Joe Lynam said the announcement will be welcomed by the government which has championed shale gas as a major source of the UK's future energy needs.

Our correspondent said Total's entry into the UK's shale gas market is not insignificant and the other four major oil and gas companies could follow.

If Britain can extract 10% of its estimated gas reserves, it could supply the entire country for 50 years, our correspondent said.

Boost

In August, Prime Minister David Cameron said the whole country should support fracking, insisting it is safe if properly regulated and could create thousands of jobs and reduce energy bills.

Shale gas has helped boost the domestic energy industry in the US in recent years, where oil production has risen and gas prices have plummeted.

Major oil companies waited for more than five years before investing in shale gas production in the US, but the UK will receive this major oil and gas company backing while the industry is still in its infancy.

Infographic showing shale gas extraction

Senior government sources told the BBC that the Total investment was a strong vote of confidence in the sector.

That view was echoed by business lobby group, the Institute of Directors, which said shale gas could be a "New North Sea" for Britain.

'Bribery'

However, Greenpeace climate campaigner Lawrence Carter, said: "Total, a French company who can't frack in their own country because the French government has stopped the French countryside being ripped up have now turned their sights on the UK countryside where the UK government seem happy to allow the industrialisation of our green and pleasant land.

He said the UK government "are pushing ahead with selling off two-thirds of Britain for drilling without a public mandate".

Mr Carter said the government was "resorting to straight-up bribery" by allowing local authorities to keep all of the business rate income from companies drilling for shale gas.

The UK currently consumes only three trillion cubic feet of gas annually.

The government previously unveiled a package of reforms to encourage development in the industry.

They included new planning guidelines to make the process of approving new drilling sites more streamlined, and a consultation on tax incentives to encourage exploration.

Communities affected by shale gas drilling are also expected to receive £100,000 in "community benefits" and 1% of production revenues, should sites start producing gas.

Total has 97,000 employees operating in more than 130 countries.

According to its website, it is the world's fifth largest publicly traded oil company.

 

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  • rate this
    +3

    Comment number 30.

    French oil and gas company Total is to invest in the UK's shale gas industry, it is to be announced on Monday.
    ---
    But you're already announced it, so what exactly are they going to announce on Monday then ?

  • rate this
    +5

    Comment number 29.

    This Gov will be "the greenest ever"! Yet they want to extract MORE fossil fuels form the ground, despite the fact IPCC and many other scientific organisations say that we need to leave it in the ground to prevent a dangerous rise in temperature. Fracking is a false economy: http://www.rtcc.org/2013/10/03/bloomberg-fracking-unlikely-to-bring-down-uk-energy-bills/. Invest in RENEWABLES, idiots.

  • rate this
    -13

    Comment number 28.

    Brilliant! About time.

    Cheap energy and plummeting fuel bills,

    Reduction in CO2 emissions,

    1000's of jobs.

    Win win win. Lets get fracking!

  • rate this
    +1

    Comment number 27.

    11.Uncarved Block
    2 Minutes ago
    We don't want or need fracking in this country. The extraction process risks polluting the land, water and air. The product pollutes the atmosphere and is causing climate change.

    +++

    Do you mean the climate that has been showing an unnatural period of long-term stability?

  • rate this
    +63

    Comment number 26.

    In the US there are thousands of fracking holes just left uncapped as companies go bust when the very short-lived resource runs out. Thousands of claims against fracking companies in the US & many people are subject to gagging orders. If fracking is banned in France, why is it going to happen here? Wake up people! We are EU when government chooses & not when there is money to be made!

  • rate this
    +67

    Comment number 25.

    The French are smart - they switched to nuclear power long ago, which provides reliably cheap energy for their people while enabling them to export huge amounts of energy to their neighbors and invest in our energy development.

    Nuclear power is clean and perfectly safe in a place like the UK - we don't get massive tsunamis here. The technology has moved on tremendously and we mustn't fall behind.

  • rate this
    +17

    Comment number 24.

    Has anyone herd the amount of reported cases in America of pollution in the water rising to the top water even if it's below the water table. It's dangerous and enjoy your cancer.

  • rate this
    +45

    Comment number 23.

    In America farmers have been paid compensation from the fracking companies for the pollution caused to the water table. Of course payments are made with a gagging order in tow!!!

    Our Dave says it's safe if regulated properly.......is that like banking has been regulated??

    oh dear!!!

  • rate this
    -2

    Comment number 22.

    Yet again, our British businesses are slow on the uptake, by the time we decide to make a move all the allowable sites will be taken.

    British companies, need to supply British people with work and help use British natural resources to reduce costs to British people.

    And to all you moaning about fracking, please take the time to understand the process fully before protesting all the time.

  • rate this
    +2

    Comment number 21.

    Can we wait for Scotland to be independent first.

  • rate this
    -3

    Comment number 20.

    WE want British Companies or we will not allow fracking !!!!!!!!!!!!

  • rate this
    +4

    Comment number 19.

    Note to self. Avoid Total petrol stations.

    Move to micro-generation, evolve to electric cars, invest in freight rail network.

  • rate this
    +168

    Comment number 18.

    Why do we always hear about other countries investing in the UK and taking profit's and resources elsewhere?

    Where are the British companies willing to take these things on to improve our own economy?

  • rate this
    -9

    Comment number 17.

    For those who dislike tracking, just look at the economical benefits it has given to the USA.

    It will fund high paid jobs
    It will fund new hospitals
    It will fund better schools

    It is okay for people to have their own objections, but it is unfair to put it above the populations needs for jobs health and education without committing their own funds to replace it.

  • rate this
    +8

    Comment number 16.

    I wonder how much of Total is owned by the French Government?
    EDF is. Could this be an attempt by the French to hold us to ransom over future electricy/gas bills?

  • rate this
    +19

    Comment number 15.

    People need to accept that we're all energy users and that we need gas. At the moment we're at the mercy of Russian producers and in a precarious position. Of course renewables (wind, wave, solar) are crucial, and the UK is far better invested in them than most. But these (and nuclear) generate electricity, which doesn't power your gas cooker or gas central heating. For the moment we need gas!

  • rate this
    +24

    Comment number 14.

    I am very excited about this. I grew up in the NE of England and went to the Uni of Aberdeen during the recession years. The oil industry saved the Scottish city from the financial crisis and its still growing whereas my hometown has been stagnant for decades. The growth of wealth and proper industry in the north will benefit entire communities and will hopefully rejuvenate those failing areas.

  • rate this
    -14

    Comment number 13.

    On a very selfish note I will enjoy the overtime dealing with anti-frackers. Every cloud..............

  • rate this
    +92

    Comment number 12.

    More profit leaving the UK then.

  • rate this
    -31

    Comment number 11.

    We don't want or need fracking in this country. The extraction process risks polluting the land, water and air. The product pollutes the atmosphere and is causing climate change.
    Stop throwing money at outdated polluting energy sources and start investing in renewable energy for the future.

 

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