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 530.

    nice that other countries invest in the UK.

    Maybe they know something we dont?

  • rate this
    +2

    Comment number 529.

    Make sure they pay all their taxes due to the UK.

  • rate this
    0

    Comment number 528.

    Reality time. There are no shale gas reserves in the UK, justy wildly differing estimates of resource, source UK Parlimentary POSTbox UK Shale Gas Jul 13. We know that recovery rates in line with US are, to all practical purposes, out of reach in the UK. Maybe 5 to 10 years hence UK shale gas may bring something to the party, but only as a small part of the total energy mix.It is being overhyped!

  • rate this
    0

    Comment number 527.

    So what will happen the next time we experience floods like we have just suffered? Will the waste water from fracking be secured, or will it flood the surrounding area?

    And what happens if methane is released into the water table? In it's natural form it is odourless, how would you know that your taps were leaking methane?

    I suppose when you light the stove you, & the neighbours, will find out.

  • rate this
    +2

    Comment number 526.

    Drilling fir shale gas is illegal in France - banned by the French government because of the dangers. It pollutes the water table!

    No way. No way! No WAY!

    We need to put solar panels on every new building starting ASAP.

    Why all these foreign companies anyway?

    Parliament - start working for your country and the people!

  • rate this
    +5

    Comment number 525.

    So the Chinese and Russians are building our new nuclear stations, billions being wasted on renewables and the French are extracting our gas to sell back to us on the EU market.

    Priceless.

  • rate this
    -1

    Comment number 524.

    BBC - whether deliberately or accidently, the ranking on this forum does not work. I have just gave - to 2 comments on pro fracking comments, on both + immediately appeared (no other comments were being ranked at that moment so no, the comments were not getting 2+ that ver sec). INTERESTING THE EDITORS PICKS ARE ALSO PRO FRACKING?!

  • rate this
    +4

    Comment number 523.

    So - Shale gas drilling in banned in France because of the dangers, yet it's fine for Westminster to literally sell the soil under our feet for French companies to exploit without a care. Great.

  • rate this
    +1

    Comment number 522.

    I sincerely trust that everyone on here who is against fracking draws their water from a well, walks everywhere, grows their own vegetables, tends their own livestock, sits in a self made mud hut around an open fire lit torches made from kindle, wears only homespun fabrics that are then self woven. Hmmm I think not. Green credentials only go so far...

  • rate this
    +6

    Comment number 521.

    I know, let's restrict fracking to London and the Home Counties and see how they like having their environment destroyed to keep the rest of the country in clover. That would make a refreshing change.

  • rate this
    +2

    Comment number 520.

    507 happybrian123

    There are an army of British exploration and producing oil companies earning us hugh returns of foreign exchange on investment.
    Premier Oil is lifting oil from the Falklands, East Africa is dominated by UK oil companies, BP will develop Libya etc etc..
    Get the blinkers' off - oil is international and we are the second biggest world players.

  • rate this
    +2

    Comment number 519.

    BBC sensoring comments for the Government. Don't want any opposition because thats in the way of profits

  • rate this
    +1

    Comment number 518.

    510 curtains2012

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

    Is this a joke? The wind might be free but investing, staffing, constructing and maintaining wind farms isn't.

  • rate this
    0

    Comment number 517.

    25.ukstudent
    "Nuclear power is clean and perfectly safe in a place like the UK - we don't get massive tsunamis here"

    ==

    We've already had one reactor fire here anyway. And we do get tsunamis. Not as often as Japan, but all coastlines get them at some point. The one which destroyed Lisbon affected us for instance.

  • rate this
    0

    Comment number 516.

    510 CURTAINS 2012

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

    If you have the land, and the money to buy / build the turbine, you will probably find that it is free. The trouble is that most of us don't.

  • rate this
    +11

    Comment number 515.

    I'm amazed that anybody is daft enough to think that this gas will be sold any cheaper! What idiots some people are! This will wreck the countryside, make a few people richer, and when it collapses will probably be blamed on the last Labour government like everything else.

  • rate this
    +4

    Comment number 514.

    This will poison water supply as all unconventional gas wells leak after 5 years, proven. Each pad uses up to 800 million gallons of water, the chemicals in flow back fluid are radioactive and carcinogenic. They have double skinned tanks to keep it in for hundreds of years, as in Preese hall in Lancashire, the rest of the fluid stays in the geology and then percolates into the water. Help!

  • rate this
    +1

    Comment number 513.

    Where is BP they need to invest in this country

  • rate this
    +3

    Comment number 512.

    @472. annieavatar

    Just read the dangers of shale gas......
    ======
    It is important that people DO read about the process of fracking. But it is very important to read independent sources which report verifiable facts and data rather than rely on biased sources which are often inaccurate and can (sometimes intentionally) frighten people who may not be able to discern truth from untruth.

  • rate this
    +3

    Comment number 511.

    481. richard4

    Tax breaks for an Oil Company, and foreign owned as well.
    ------
    Madness isn't it? Bribing foreign companies - it's no different from Foreign Aid for India.

 

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