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 510.

    485.The J Hoovers Witnesses
    1 Minute ago
    303.bangers64
    "we pay less for power than the French"

    ==

    As theirs is mainly generated by "too cheap to bother metering" nuclear energy that's hardly surprising.

    +++

    The Earth charges us nothing for using the wind, so why should electricity from that source be metered?

  • rate this
    +4

    Comment number 509.

    open your eyes, if you look into the history of fracking and the effects its had on some communities in america you certainly would not want your children being brought up in an area where huge volumes of water (so much for saving energy and water) and chemicals are being pumped into the ground. figures based on assumption aren't worth risking our health and future generations..

  • Comment number 508.

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

  • rate this
    +3

    Comment number 507.

    Why have a foreign company who will move profits out of the UK? Don't we have any British Companies left who can extract the Gas??

  • rate this
    -1

    Comment number 506.

    Has the British Geological Survey also carried out surveys in the South of England, say Chadlington, Dean and Spelsbury for instance?

  • rate this
    +3

    Comment number 505.

    And when they're done and we're all living in a landscape resembling a post apocalyptic wilderness, at least it be won't just be the North East that's desolate, now will it.
    Mind you, those who can afford it could take their money and move to France.

  • rate this
    +1

    Comment number 504.

    FRACKING WILL POISON YOUR WATER AND GIVE YOU CANCER, READ UP ON IT.

  • rate this
    +1

    Comment number 503.

    I don't think anyone except the experts really know & understand the risks involved with fracking, which is why I'm on the fence about it. We hear about the possibility of earthquakes for example, but how many people realise that the same thing happened with coal mining without much fuss, so why the fuss now? On the other hand, are we being kept in the dark regarding the chemicals used?

  • rate this
    +5

    Comment number 502.

    electricity companies sold to French ,German companies,nuclear power to France+China now more of UK energy resources sold off - this is not the answer to securing the uk's power needs for the future - UK companies cant invest in this economic climate they dont have the money at the moment thanks to the economic situation - this is a short term fix that condemns future uk generations to slavery

  • rate this
    -4

    Comment number 501.

    Just get on with it, but not by foreign companies, We need to control this within the UK. in the USA the price of gas has halved since they begin using fracking. we can see this benefit as long as it is a UK company.

    Don't let the Nimbys win

  • rate this
    +3

    Comment number 500.

    You can thank Thatcher and the subsequent Tories including Blair and Brown for the generation long disruption to the UK's engineering and manufacturing industry.

    See if you can find another country with no vehicle manufacturing capability of their own. Pro Tip: You can't.

  • rate this
    -3

    Comment number 499.

    25 UK student.
    Nuclear power is clean and perfectly safe in a place like the UK .
    -----------------
    Is it? The probability of the hazard occurring are small. The consequences of catastrophic failure would be unacceptably large.
    Risk is measured as the product of probability of the event occurring and the consequence. It follows that the risk is unacceptable.
    If it can happen it will!

  • rate this
    +2

    Comment number 498.

    @472. For God's sake, they mined coal from under houses too. Not many squealing then. Coal mines caused far more damage through subsidence than fracking will.

    Actually, we are still sat on a fortunes worth of coal; lets get that too!

  • rate this
    0

    Comment number 497.

    Stop thinking about money and bloody profit!

    The earth, for our grandchildren will be unusable and poisoned.

    This is why we should nip this in the bud - NOW and please be aware - the French will not allow fracking in France because they have seen what has happened in America.

    Write to your MPs - it worked to stop the killing in Syria, it will work again to stop this madness.

  • rate this
    +2

    Comment number 496.

    People forget that masses of gasses were released due to coalmining & still are & also from landfill, that houses are built upon.

    Apparantly it seems some think it is ok for them to poison & gas others with their car & consumer transport/manufacture emission/polution behaviours but they dont want it coming directly at them in own homes.

    TOUGH

  • rate this
    +2

    Comment number 495.

    18.
    0tam


    "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?"

    British "entrepreneurs" have been too busy exporting jobs , resources and profits skimming enough off the process to live very well themselves

  • rate this
    +2

    Comment number 494.

    Where are all the British companies rushing to do this ? Oh silly me we don't have any British companies any more they have all been sold off to foreign companies.

  • rate this
    +1

    Comment number 493.

    Pollute the air and water so that both can be sold to the public by corps that will see a financial benefit from both natural resources, seems like what is going to happen if we carry on like we are!

  • rate this
    -1

    Comment number 492.

    Good News. More of the same needed...shale gas and oil have an important role to play in a country with a rapidly growing population like Britain...and provide security and investment streams to keep the growing population in work.

  • rate this
    +2

    Comment number 491.

    If shale gas going be cheap we the consumers won't get the benefits with foreign companies running thing you just got to look at utilities prices charge by these foreign companies now

 

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