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
    +4

    Comment number 470.

    465.Johnny Norfolk

    "Great news. The sooner the better,We should be able to have cheaper energy . Let get rid of gren taxes. to be sure vote UKIP."

    Newsflash: 1500 sites in Norfolk identified by Total as 'fracking' ready for drilling.

  • rate this
    0

    Comment number 469.

    Of course we all want cheaper energy, but to some if the source is nearby they do not want anyone to have it. Not a problem if it is near anyone else.
    Natural resources are where they are so get over yourselves. The needs of the many etc...

  • rate this
    +3

    Comment number 468.

    Isn't the education in this country marvellous.
    The ignorance shown by many posters on the subject shows that everything is "perfect".
    When that nice Mr Gove has finished the level of ignorance will be well established in so many areas.
    I will be pleasantly surprised though if ever THINKING is brought back into education from the early years.

  • rate this
    +1

    Comment number 467.

    44. Semisatanic

    States in America are banning fracking now because of earthquakes and uncontrolled pollution to their drinking water table.

    ========

    Which states have banned fracking? I did a search but could only find references to cities, towns and counties imposing bans. Here is my reference.

    http://keeptapwatersafe.org/global-bans-on-fracking/

    Could you post a link to your source?

  • rate this
    -2

    Comment number 466.

    Fracking will have no more of an impact on the environment than did coal mining, and I'm sure many of us in the north of England will welcome any industrial investment which helps in even a small way to replace the jobs lost during the Thatcher era.

    I wonder whether those in the wealthy south of England will be so welcoming if gas is found there, but we need our own sources of energy pronto.

  • rate this
    -18

    Comment number 465.

    Great news. The sooner the better,We should be able to have cheaper energy . Let get rid of gren taxes. to be sure vote UKIP.

  • rate this
    +5

    Comment number 464.

    Why haven't the Government set up a sovereign wealth fund for fracking, so that it truly would benefit the country. (See what Norway did with their oil). UKIP propose this, why won't the Conservatives or Labour adopt it - maybe they are more than happy to see the profits squandered and disappear to their fat cat elitist pals.

  • rate this
    +1

    Comment number 463.

    I don't have any real issues with shale gas, but if we are going to extract on mass, I would like to see some kind of sovereign wealth fund created. At this rate we are not only passing on an enormous national debt to future generations, we would also be taking away from their future ability to create wealth so that debt can be serviced.

  • Comment number 462.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • rate this
    +3

    Comment number 461.

    There is technology out there to replace fossil fuel dependency, unfortunately it means the power will truly belong to the public and with no dependency on the corps they wont allow it, think I'll join the Mars mission and get off this greedy planet!

  • rate this
    +3

    Comment number 460.

    @442 Trymachine

    These are facts, they are carcenagenic and they are used in fracking. The chemicals used in the water for fracking are pumped into the ground, do you think they dont get into the water systems or our drinking water. Your mistaken.

    Thanks for your point and all that. I happen to be educated in the subject and don't come on to HYS to demean what others say. Simply to state facts.

  • rate this
    +1

    Comment number 459.

    Unless we are prepared to keep paying for foreign imports and meet their demands for their higher and higher cost's, then what choice do we have. But it is a worry that it has to be a foreign company prepared to take the job on. what has happened to Britain, are we now foreign owned and unable to do anything for ourselves?

  • rate this
    +1

    Comment number 458.

    Nowhere in the EU has cheap energy. Fracking won't change that, its about security and longevity of supply. In fact, guess who has the highest petrol and diesel prices on Earth...Norway...I kid you not. Get the idea of the UK getting cheap fuel from fracking OUT of your heads,it aint gonna happen.

  • rate this
    +1

    Comment number 457.

    445.Brucey
    "... it is where the company is REGISTERED!"

    E&P companies are not allowed to operate in the UK unless the company is a UK entity with contingency funds and finances controlled and taxed within the UK.

  • rate this
    +1

    Comment number 456.

    450.pagan
    Just now
    ....And when you can't drink water out of the tap, or even light a cigarette from the fumes coming out of a tap as witnessed in the U.S.,

    +++

    Most people haven't got the time to rig up gas supplies to their taps to emulate the YouTube "evidence", even if it was legal to do so.

  • rate this
    +1

    Comment number 455.

    While I am against fracking due to environmental reasons, if it is to be done, the licenses should be given only to UK companies using UK workers. The French already own too much of our utilities; we don't want them also to have all our gas reserves.

  • rate this
    -1

    Comment number 454.

    Gas prices when seriously down in the US after they started using shale gas.
    We need gas for the economy. We need lower prices for the pensioners to be able to keep their houses warm.

    The knee-jerk reaction of Green lobby is predictable. It is all about making everybody's life a misery so that they feel superior in their worshipping of Gaia.

  • rate this
    +2

    Comment number 453.

    France constitutional court upheld 'it is unlawful to FRACK IN FRANCE' and imposed a ban throughout France, in October 2013. So why are we allowing the French to Frack in England. NON.NON.NON, to any more foreign companys taking yet another slice of England. P.S. The Germans have also banned fracking in Germany. Are we stupid? If we frack give it to UK companys only.

  • rate this
    +3

    Comment number 452.

    if they could crack solar cell efficiency to be greater than 30-44% we wouldn't need fossil fuels.
    Imagine a 90%+ efficient solar cell fitted to every house along with solar heat pipes.

  • rate this
    0

    Comment number 451.

    France's constitutional council has rejected an attempt to overturn a ban on fracking, the controversial method of extracting gas from rock.

    US-based firm Schuepbach Energy challenged a ban imposed in 2011 based on potential risks to the environment.

    France, which relies heavily on nuclear power, has some of the largest shale gas deposits in Europe.

 

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