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Total inks UK shale gas agreement

London, January 14, 2014

Total has become the first major oil and gas company to strike a deal to explore for shale gas in Britain, boosting a technology which has brought cheap energy to the US but sparked protests by environmentalists and local communities.

The French group said yesterday it had bought a 40 per cent interest in two licences in the so-called Gainsborough Trough area of northern England for up to $48 million.

Total's involvement, which follows shale gas deals by utilities Centrica and GDF Suez, puts Britain firmly on the map as one of Europe's strongest prospects for the development of unconventional oil and gas resources.

The investment is tiny in industry terms, but experts say it paves the way for similar moves by other top oil and gas firms.

"We expect further international energy companies to follow the lead taken by Total and ramp up their plans for signing 'farm-in' agreements with UK firms that already have licences to explore UK shale reserves," said Glynn Williams, partner at Epi-V, an investor in oil and gas services.

However, shale gas extraction or "fracking" - using chemicals, water and sand injected underground at high pressure to fracture rock formations and release the gas - is bitterly opposed by environmentalists who fear it could pollute water, blight landscapes and add to global warming.

Last summer, Britain saw protests erupt in the south of the country as local communities expressed opposition as well.

Britain's shale gas resources are estimated at more than 400 times the country's annual gas consumption and the government has thrown its weight behind exploration at a time when rising energy prices have become a hot political issue.

In the US, shale gas exploration has transformed the energy market, caused prices to collapse and set the country on the path towards energy independence.

Tighter planning and environmental regulation, and denser population, mean Britain is unlikely to see a shale gas boom of the kind experienced in the US.

Nonetheless, the British government supports shale gas exploration as a way to reduce the country's growing dependence on gas imports and to increase revenues.

It has allowed handsome tax breaks for companies involved in the nascent industry and promised financial benefits to local communities affected by shale gas exploration.

The government also announced yesterday that local councils will be able to keep all of the business rates to be received from shale gas sites, instead of 50 per cent currently given, amounting up to £1.7 million per site.

"A key part of our long-term economic plan to secure Britain's future is to back businesses with better infrastructure. That's why we're going all out for shale," Prime Minister David Cameron said, announcing the new rates.-Reuters




Tags: Total | French oil giant | UK shale gas |

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