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
    +1

    Comment number 610.

    Fracking has not been proven safe, yet the present government is allowing it to go ahead.

    If any harm comes out of fracking, then David Cameron, George Osborne, Nick Clegg and any other government member who allowed fracking, should be brought up on criminal charges and jailed if found guilty.

    Let them take responsibility for their actions.

  • rate this
    +7

    Comment number 609.

    The governemt scientists, science advisors and the TOTAL HSE people think its safe.

    After seeing how many HSE hoops I have to jump through working in the North Sea for TOTAL, I can say that If the oil companies weren't convinced that the environmental damage was negligeble, they wouldnt touch it with a drill string, they are the ones who have to clean it all up at massive cost if it goes wrong.

  • rate this
    +1

    Comment number 608.

    #604
    So, the home of free market economics isn't practising what it preaches but the EU is....bizarre isn't it?

  • rate this
    +6

    Comment number 607.

    The trouble with this Country is that there is always a fringe minority that will object to everything . If it comes to a choice between fracking to supply future generations with energy(light and heat) or whether some greater spotted toad or whatever other species needs to,be saved I say goodbye to the toad .Thank god the Victorians saw the bigger picture and pushed the boundaries

  • rate this
    +3

    Comment number 606.

    598.Matt M
    most of the people complaining about fracking also complain about increasing energy costs...

    --

    You want to guess at the cost of a clean up if something goes wrong?

    Once these chemicals get into the water table they can be diluted to an extent but its impossible to ever actually remove them.

    You want to talk expensive, try importing half our clean water from abroad?

  • rate this
    +2

    Comment number 605.

    The paid shills are working hard voting up their agenda on this thread

  • rate this
    +2

    Comment number 604.

    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.

    I find it odd that my comment (582) is being marked down. EU regulations dictate that we can't be protectionist like the USA. We are not allowed to keep cheap gas for ourselves, its the law

  • rate this
    0

    Comment number 603.

    "Paper late!" cried a voice in the crowd.
    "Old man dies!" The note he left was signed 'Old Father Thames'
    - it seems he's drowned;
    selling England by the pound.

  • rate this
    +4

    Comment number 602.

    People on here rightly bemoan the demise of UK industries and the coal industry. I am old enough to remember the factory chimneys belching out their fumes and the slag heaps by the pits. That is what powered our economy and just as it was the right thing for the country then, so fracking is the right thing for us now. Other industries will emerge as a result

  • rate this
    -2

    Comment number 601.

    The French have a word for it that seems uncommon in English vocabulary, Investment in a good thing.
    So unlike British investors to miss out on a gift horse. This is another fine opportunity for growth via internal investment gone.

  • rate this
    +1

    Comment number 600.

    That old chestnut of cheap fuel thrown in to this article,eh!
    That was mentioned when nuclear was the next big thing. It was also the carrot dangled when oil was gushing ashore in abundance!
    Let's be clear here.
    These firms will maximise profits,charge the earth(!)ruin the ecology,then sod off and leave it to the taxpayer to clear up the mess.

  • rate this
    +1

    Comment number 599.

    It is illegal for Total to do this in France, n'est pas???

  • rate this
    +3

    Comment number 598.

    I bet most of the people complaining about fracking also complain about increasing energy costs...

    Can't have it both ways!

  • rate this
    0

    Comment number 597.

    This should not be allowed, the French are masters at ripping off the British, why help them....

  • rate this
    0

    Comment number 596.

    18. OTAM
    That is because all the large company's that we did own were sold off at the time by Thatcher the Tories, so we have nothing of any substance left now. That is why this government and previous government have to go cap in hand to other country's for investment. That is the answer to your question, wonder will the pound shops and charity shops go next?

  • rate this
    +1

    Comment number 595.

    Fracking is not safe. Google 'fracking' and find out. The chemicals are very toxic and all wells do eventually fail, says almost every scientist. Fracking is banned in France. The claim that fracking has been carried out at Wytch Farm in Dorset was a lie. Why do the authorities need to lie, is fracking is safe?

  • rate this
    +1

    Comment number 594.

    566. sotuneup

    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.

    =====
    Local politics?.....

    "The Dallas City Council passed restrictions that bar (fracking) within 1,500 feet of a home, school, church, and other protected areas"

    http://rt.com/usa/dallas-passes-fracking-restrictions-178/

  • rate this
    +2

    Comment number 593.

    And what are BP doing ? Lets have British companies getting this stuff out of the ground.

  • rate this
    +1

    Comment number 592.

    Oh dear - more selloffs for private gain.

  • rate this
    +3

    Comment number 591.

    Here's a list David:

    Nuclear Power Stations
    The Royal Mail
    Lloyds
    RBS
    HS2
    Shale Gas

    It seems to me all u really care about is big big business. What about the people you serve.? Oh yes we're getting cuts, cuts & more cuts! We're getting poorer whilst your business chums getting even richer.

    You've lost my vote & as many of people as I can persuade 2 - won't be very hard... You are a disgrace!

 

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