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
    +2

    Comment number 570.

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

    Maggie and Tony went international, didn't you notice?

    There are virtually no major British firms left. We are now just a host for multinationals to pick over our bones and the City to fleece us on banking and property.

  • rate this
    0

    Comment number 569.

    539. sid

    What energy shortage....??

    http://www.youtube.com/watch?v=rnRyVK7HqJE

    ========

    I would not rely on the Zeitgeist Movement as a source of unbiased, factual and reliable information. I'm sure that some of what it says is founded in truth - but it's mostly wrapped up and presented in a way which suggests a degree of fanaticism. By all means watch this - but with an open mind.

  • rate this
    -4

    Comment number 568.

    Absolutely dreadful, yet another failure at preventing Multi-national corporations from digging up the countryside. I would have thought the recent protests would have highlighted how unpopular the idea is but yet again the money grabbers seek wealth and fortune over care and consideration for the environment and world round us.

  • rate this
    +3

    Comment number 567.

    People who are against it can I ask , do you not have a gas boiler, hot water, do you not use a car, use public transport, do you ever go on holiday, do you ever need to go to hospital, do you cook.

    Everything requires energy, having a few windmills dotted around will not produce enough energy for a modern economy.

    This minute only 6% of our energy comes from wind! it is both costly , unrelible

  • rate this
    0

    Comment number 566.

    Fracking has been banned by the city of Dallas. I wonder what they know that the UK fracking industry either doesn't know or isn't telling us. Surely Cameron should not be raising the pressure on a industry that is unsafe, or does safety and the environment not matter when big business profits are on the line?

  • rate this
    -2

    Comment number 565.

    I can see that the pro carbon fuel crowd are out in force adding their propaganda to the comments. Well, when your future family are fighting for their lives in the cancer ward, just remember why. I type this after losing countless relatively young and healthy non smoking slim family members to cancer caused by diesel particles in London and Oxford. (Oxford is also very heavily polluted.)

  • rate this
    0

    Comment number 564.

    #546
    Yes, the French government actually supports French industry in complete contrast to the clowns in this country who have actually sunk to the depths of fighting the EU over the capping of Mobster bonuses.
    It's bloody crackers!!

  • rate this
    -2

    Comment number 563.

    Editors' Picks

    Totally biased bull.

  • rate this
    -3

    Comment number 562.

    Re 544. Trouble is Maggie sold it all off to the foreign company's we only own some corner shops. But she sold hers whilst the going was good, insider dealing I think it is called, at least that what it is if we do it.
    Re 552 I would not trust BBC news to tell me it was raining. whilst I look at it from my window. Lobbyists seem busy voting up or down.

  • rate this
    -2

    Comment number 561.

    Foreign company makes money and despoils our countryside just so chavs can wear T shirts at home in winter and drive gas guzzlers. What's not to like?

  • rate this
    +5

    Comment number 560.

    Crikey - We haven't even begun to get it out of the ground and it's being sold off already! When will we ever learn ?

  • rate this
    0

    Comment number 559.

    well its more palatable then the some of the countries our resources and businesses are sold off or financially biased by, that the UK government does.

  • rate this
    +15

    Comment number 558.

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

    The City has no interest in the long term so British companies can't get financed. The CoL makes its money by smash & grab raid with the connivance of tame or corrupt politicians. The latest example being the R Mail sale, which made the underwriters tens of millions after their deliberate undervaluing

  • rate this
    0

    Comment number 557.

    542
    IT WILL BE THOUGH.

  • rate this
    0

    Comment number 556.

    551 Ian

    " I doubt the French would allow these developments without proper research."

    Unlike the Dutch and the Germans and the Canadians?

  • rate this
    +3

    Comment number 555.

    553.David Roe
    Just now
    What is the carbon cost of burning shale gas?


    +++

    What is the carbon cost of each windmill?

  • rate this
    +3

    Comment number 554.

    If we need to generate more CO2 - What about all the coal that is still down there?

    While we are at it there are still reserves of copper under Snowdonia, tin/coppper/tungsten under Cornwall and lead/fluoride under County Durham.

    Lets just dig the whole place up.

  • rate this
    -1

    Comment number 553.

    What is the carbon cost of burning shale gas?

  • rate this
    +2

    Comment number 552.

    There's a lot of negativity on here. BP (still a British company) is the second largest producer of oil and gas in the US. We all benefit from cheaper prices by allowing foreign companies to invest here and when other countries allow us to compete for business over there.

    France doesn't allow fracking: maybe that's why they pay 6.22c/kWh for gas and we pay 5.75c. bbc.co.uk/news/business-25200808

  • rate this
    0

    Comment number 551.

    That's confirmed it for me. I intend to 'frack' off to France at the earliest opportunity. I doubt the French would allow these developments without proper research.

    The appearance of shale gas has taken the environmental debate back 15 years...

 

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