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 590.

    Wow, this looks a bit wrong to me! The sooner we all realise that you can't have infinite growth on a finite planet the better. I'm no tree hugger but we really have to look after our planet and this just shows the desperate measures we are now going to. We have an energy source from the sun, the wind and the waves. More investment here pls instead of craping on our own doorstep!

  • rate this
    +1

    Comment number 589.

    Not in my back yard.

  • rate this
    0

    Comment number 588.

    Why a British company cannot do this beats me. All the profits will end up in France

  • rate this
    +1

    Comment number 587.

    Guess who will have to foot the bill to clean up the inevitable mess. Total?

  • rate this
    0

    Comment number 586.

    I think it is a fracking good idea!

  • rate this
    +2

    Comment number 585.

    We should be investing in renewables, not more fossil fuels, especially not such a dangerous source as shale. The UK is a tiny, very densely populated country, and when fracking goes wrong and pollutes the water table, people will die. The risk is totally unacceptable.

  • rate this
    -5

    Comment number 584.

    Come on, Britain. Get behind fracking. It's time we put the 'environmental' Luddites back in their box. If they had had their way, we'd still be using horse-drawn carriages and would never have pioneered the Industrial Revolution. Some entrepreneurial courage is required.

  • rate this
    +3

    Comment number 583.

    As with nuclear energy it's the tax payer who will have to pay for the clean up after all profits have been taken by Dave and his mates.

  • rate this
    -2

    Comment number 582.

    I'm sure as long as the Fracking is confined to the North England and the landscape and people there fully exploited I'm sure everything will be fine. . . . . I would like to see in affecting the beautiful landscape the South East of England - and 'heaven forbid' causing a drop in property prices.

    Tory governments are so transparent.. . . . .

  • rate this
    +2

    Comment number 581.

    Joe Lynam Business correspondent, BBC News

    I am puzzled why you think it will bring down gas prices in the UK. Unlike the USA any gas produced here will be sold on the world markets at world market prices. How is that going to lead to significantly lower prices in the UK?

  • rate this
    +3

    Comment number 580.

    There goes the water table...

  • rate this
    +4

    Comment number 579.

    UK punches above its weight in terms of oil corps HQ'd here - for majors, mid-cap and adventurous minnows. GREAT that Total is going to invest in UK shale - absolutely no worries that a Paris based major is doing this. Thousands of British folk will benefit - direct/indirect jobs and many of us with money in pension funds already own a piece of Total.

  • rate this
    +2

    Comment number 578.

    @572 So I guess you don't vote then? Maybe you should set up a party of your own & come up with some 'affordable' policies that will not mean adding 5p on the basic rate of tax or borrowing until the country is bankrupt.
    Complain, for sure, but at least have the wit to suggest an alternative.

  • rate this
    -1

    Comment number 577.

    What an awful prospect - another important national asset being in the hands of international corporate gangsters in the near future.

    A fraction of the £500 billion shovelled into the pockets of the criminal, thieving bankers in recent years would provide the investment that would ensure the all benefits accruing from the developments would be in the direct interests of the British people.

  • rate this
    +1

    Comment number 576.

    Fracking banned in France - but Dave happy to have the French do it here - tells us what?! Luckily this government would never put profits before safety, the environment, well, you name it really, right?

  • rate this
    +3

    Comment number 575.

    539.sid
    24 Minutes ago
    What energy shortage....??

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


    +++

    Do you mean the one caused by the people who switch on their computers to watch YouTube?

  • rate this
    0

    Comment number 574.

    I have reservations about carbon deposits where ex poiticians would be the voice of deposit allowances and purchase ie: making an individual fortune. If the green people want it ,you should be fighting the folks that want to tie individual moniterial gain to clean air and energy usage. If gov are serious there needs to be no individuals that gain in something so serious as a nations future.

  • rate this
    0

    Comment number 573.

    Fracking kills the land

    The French will not allow fracking in France because they have seen what has happened in America.

    It has destroyed communities in the US.

    In fact it pollutes more than coal fired power stations.

    It is dangerous.

    So if you are very happy to see the countryside poisoned for short term profit, by all means support this complete madness, if not tell your MP

  • rate this
    -3

    Comment number 572.

    Can SOMEONE please advise if we can have Cameron for TREASON!

    First we have the Chinese providing our nuclear power, the French raiding our shale gas, our troops get slaughtered in Yank wars....he & his Bullingdon chums have comprehensively stabbed this country in the back! That also goes for his mates in the LimpDems and NewLieMore!

  • rate this
    +8

    Comment number 571.

    I have been involved in this industry for my entire 35 year working life. The debate confirms to me that democracy is held hostage to either:

    1. Wilful misinformation by antagonists with an agenda; or:
    2. The encouragement of people to readily express opinions on subjects about which they are at best ill informed or ignorant.

    We are a can't do nation now suffering from not having done.

 

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