French oil giant Total to invest in UK shale gas

 

The BBC's David Shukman explains how fracking works

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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 790.

    Uncarved block. sorry but you don't get it. We would all prefer it if renewables worked but they don't. I recently read an independent report that suggested the only way wind power would be able to generate enough power for the whole country is to have a wind powered generator visible from every single point on the land surface of the UK. Is that what you want? Nuclear is still the lowest impact

  • rate this
    +1

    Comment number 789.

    Its probably too early to say how advantageous this will be to the UK's economy or how much it will damage the environment. If it is not hugely widespread than its probably be a good thing, if half the countryside is dug up then obviously thats going too far. I'm somewhat sceptical that the UK's economy will benefit, as other countries have,by allowing itself to become a major source of shale gas

  • rate this
    +1

    Comment number 788.

    I am just glad it is one of us the EU that is investing it could have been worse it could have been China or the USA I might regret saying that if we leave the EU

  • rate this
    +6

    Comment number 787.

    Hydrogen fuel-cells are a very nice energy storage system, or you can burn it directly in a conventional engine.
    Unfortunately a HUGE amount of electrical power would be needed to make enough H2 for our needs, replacing all the petrol and diesel.
    And then you have to store it, in a depot or in the vehicle, at 5000psi minimum!!!!!!!!!!!
    FIVE THOUSAND PSI (MIN)...... Drive safely now!

  • rate this
    0

    Comment number 786.

    Why are we outsourcing another opportunity to benefit/profit from our natural resources?

    Big plc's have been shown to use tax avoidance/evasion schemes as a norm. What chance have local authorities got when experts at HM Treasury don't do anything about it.

    Total and all other need to set up UK subsidiaries and publish full accounts for public scrutiny, working within strict guidelines.

  • rate this
    +3

    Comment number 785.

    If you really wanted to start somewhere, we would start with Bio fuel.

    The carbon offset is so bogus. To think a farmer wouldn't be growing a crop if he wasn't making ethanol or oil. pfffft

    And yet it release higher particulates into the atmosphere than any other fuel. No one has any problem believing tobacco smoking particulates kill.

    Perhaps farmers should grow food

  • rate this
    +3

    Comment number 784.

    More proof if we really needed it that Britain is now a third world country to be exploited by more developed nations. The Chinese build our nuclear power stations and the French exploit our energy reserves. As David Cameron said Britain is open for business so who else will come in and take over our industries and utilities? Only the corrupt elite benefit from this type of "investment".

  • rate this
    -2

    Comment number 783.

    So even as the UK deals with massive flooding, the US suffers extreme from cold and the Philippines mops up the mess of its typhoon, we continue exploiting the carbon fuels that are causing this mess.

    What a spectacularly arrogant, contemptible and just plain stupid species we are.

  • rate this
    -3

    Comment number 782.

    Government are only interested in products they can sell. Any possibility that you can make your own energy they will prevent it.

    Solar panels expensive to buy, except Chinese systems but the EU have restricted their imports.
    Bio diesel from used cooking oils.
    Hydrogen on demand, not advertised and they don't want to, increase your car's MPG by 50%.
    Free energy exists, most are blind to the fact.

  • rate this
    0

    Comment number 781.

    774. CURTAINS 2012
    To what method of getting H2 from NG does the article explicitely refer?
    ---
    Are you unable to read? They refer to two: natural gas reformation (the current cheapest method) and solar power to split water. They go on to suggest for PV to compete with NG it would need to be 15-25% efficient.

    One uses water and solar energy, the other uses natural gas. Simple enough?

  • rate this
    +2

    Comment number 780.

    752. mirrorbus
    I fount an interview about Total's Shale Gas plans.....He himself is aware of the problems of vast amount of water needed......

    ====

    Thanks. Very interesting clip. However, I can summarise the references to water as

    Need lots of it - need to get it from non-aquefer sources
    Need to ensure it doesn't contaminate ground water
    Need to recycle it

    Sounds very responsible to me

  • rate this
    +3

    Comment number 779.

    770.ray
    3 Minutes ago
    Here is a list of possible energy sources - Cold Fusion, Solar, Wind, Wave, Hydrogen and zero point.

    +++

    You've still not told us how you would break the atomic bonds between Hydrogen and other elements.

  • rate this
    +2

    Comment number 778.

    Yet again we find that foreign entities are far more more active in seeing a good opportunity for UK investment than the Brits. The list of British inventions, discoveries and knowledge that has ended up benefiting foreigners is endless. When will our financial community realise that there is more to investing than simply seeking out the latest short term sub prime scam or it's like????????????

  • rate this
    +1

    Comment number 777.

    Viewers should see the documentary 'Gasland II'. Innocent Americans right across the country with contaminated water, worthless property & communities, water taps that combust into gas flames et al. This is a 'Total' nightmare and once the rubicon has been crossed there will be no turning back from a 'Total' environmental& humanitarian disaster.

  • rate this
    +1

    Comment number 776.

    @316 MikeT (Ed's Pick) .. "I'm all for it. Pity is has to be a foreign group" Hear hear! Ideally it would be a nationalised industry, or at least Brit owned, but with all the protests (from idealistic people who really have not thought through the alternatives), if it was in the hands of the government, nothing could ever get done.

  • Comment number 775.

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

  • rate this
    0

    Comment number 774.

    764.mrwobbles
    3 Minutes ago

    @Curtains that still doesn't make NG the feedstock for PV hydrogen production, as was your assertion.

    +++

    To what method of getting H2 from NG does the article explicitely refer?

  • rate this
    +4

    Comment number 773.

    743.chrislabiff
    "Only the British would be dumb enough to tolerate this."

    I know - who else would want to develop their own source of gas; reduce gas prices; create jobs; and collect millions in tax revenue.

    And yes, it is safe.

  • rate this
    -1

    Comment number 772.

    at least in the winter we can get some free heating from setting the tap water on fire...

  • rate this
    0

    Comment number 771.

    750. charlesmn

    ' A complete lie.If fracking used more energy than it produced it would not be economical. It is not subsidised unlike windfarms. '


    It is just another QE printed money laundering scam. Designed to give some bankers and the corrupt corporate Tories a 5% back on their cash.

    They involve a foreign firm / government to keep everyone happy and make the whole thing look genuine.

 

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