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
    +7

    Comment number 630.

    610. CodeDebugger

    Getting out of bed or crossing the road has not been PROVEN safe either.

  • rate this
    +4

    Comment number 629.

    Go away greenpeace. You lot already screwed up nuclear expertise and generation in the UK. Focus on the cause: too many people.

  • rate this
    +6

    Comment number 628.

    @619.

    Government scientist are paid by the government for their advice whether it is pro or con. To suggest that they have vested interests is a fallacy

    Since I am a freelance geophysicist & have no loyalties to anyone, & have compiled many risk assessments on fracking projects, conventional hydrocarbons, and renewables projects.

    "Its Safe" - There is your independant scientists answer.

  • rate this
    +2

    Comment number 627.

    Once again Britain allows foreign companies to come in and take advantage of our inventions, companies and now natural resources.
    The rest of the world must look at us as a right bunch of mugs

  • rate this
    +2

    Comment number 626.

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

    Nice idea but the majority of shareholders in BP are American, probably why its no longer called British Petroleum

  • rate this
    +2

    Comment number 625.

    So we let the French take the profits, control the eventual price of gas and leave us with the spoil and environmental mess.

    Another brainwave from a government so focused on keeping the City happy that they can't see a real investment opportunity..

    Let US invest in this for once. That way WE can decide who is employed, WE can control the price and WE and take the profits instead of city spivs.

  • rate this
    +3

    Comment number 624.

    For 0tam

    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.

    BP is, and Shell is partly, a British company.

  • rate this
    +2

    Comment number 623.

    to 582.
    albanaich

    Fracking , if it can be done, will be a nationwide business, wherever their is shale. If there is shale in the South-East then it will happen after all the landscape in Southern England is rather poor and isn't worth that much from a prettyness point of view. It's OK but nothing like Northern England.

  • rate this
    -3

    Comment number 622.

    Why are people surprised by this - this scum of a government is selling the British isles to the highest bidders . These people are traitors to the British people - we need a revolution to clear this scum and put people into power who care about everybody in society and not just themselves

  • rate this
    +1

    Comment number 621.

    Just the whore of Europe with another client, nothing to see here move along now.

  • rate this
    -5

    Comment number 620.

    What's going on BBC? all the comments against fracking (the majority of posters) are getting marked down. Some shills somewhere are busy eh? From France? or closer to home?

  • rate this
    -1

    Comment number 619.

    609.rm1206
    "The governemt scientists, science advisors and the TOTAL HSE people think its safe."

    So people paid by the government say it is safe.. so what... what do independant scientists say because I can assure you it differs from your version.

  • rate this
    +3

    Comment number 618.

    There is plenty of gas in the commons, stick a drill in there as there is enough to go round Britain......Twice!

  • rate this
    0

    Comment number 617.

    At last! This is great news:
    - Less reliance on Russian gas
    - Tax revenues to reduce debt mountain
    - Cheaper energy prices for individuals (US gas prices have halved through shale revolution)
    - More competitive UK industry as costs reduce
    - Gas emits less than half the CO2 of coal
    - Less visually polluting than wind farms

  • rate this
    +3

    Comment number 616.

    Bad idea !! I live in Holland where we have the Groningen gas fields situated in the north of the counrty, it brings alot of revenue, but at what cost. The last fews years there has been major media attention because of "earthquakes" deep underground which are now damaging thousands of houses and property with huge claims against the drilling operators. On paper all looks good, but watch out !!

  • Comment number 615.

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

  • rate this
    +4

    Comment number 614.

    Please get on with it.

    There seems a vocal minority who seem to want to say "No" t everything these days. Oddly they seem to be the sons and daughters of those who wanted to prolong loss-making, dirty and polluting coal.

  • rate this
    +4

    Comment number 613.

    @598. Matt M
    > I bet most of the people complaining about fracking also complain about increasing energy costs...
    > Can't have it both ways!

    Yes you can. It's called having your cake and eating it too and these people are experts at it.

  • rate this
    +3

    Comment number 612.

    If David Cameron is so sure of the safety of fracking, then he'll have no problems with drilling in his West Oxfordshire constituency. There's plenty of shale gas buried under his and his constituents' homes.

  • rate this
    0

    Comment number 611.

    Frack Baby Fraaaaackkkk!!!!!!!!!!!!!!!

    Can`t wait hooray, bring it Onnnnnnnnn, Oh Yeahhhhhhhhh!!!!!!!!!!!!!

 

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