France’s Total invests in Britain’s shale gas industry

France’s Total became the first oil and gas major to enter Britain’s shale gas market by acquiring a 40 per cent interest in two licences in northern England for up to US$48 million.

France's Total yesterday became the first oil and gas major to enter Britain's shale gas market by acquiring a 40 per cent interest in two licences in northern England for up to US$48 million.

Total's involvement, which follows shale gas acquisitions by utilities Centrica and GDF Suez, is a major boost to Britain's growing but controversial shale gas industry, seen as one of Europe's strongest prospects for unconventional oil and gas development.

The investment is tiny in oil industry terms, and especially small in the context of the tens of billions of dollars spent every year by Total, one of the world’s top five investor-controlled oil and gas groups.

However, having such a large player as a partner will be a feather in the cap of industry minnows Dart Energy, Egdon Resources, IGas and eCORP Oil & Gas UK, with which Total will partner.

Britain’s IGas will be the operator of the initial exploration programme and Total will take over ownership of the projects as they reach the development phase, the companies said.

Total, which is one of the UK’s biggest offshore oil and gas producers through its Total E&P UK, said the shale deal “opens a new chapter for the subsidiary in a promising onshore play”.

The deal to search part of the Bowland Shale formation in Lincolnshire is “designed to verify the significant shale-gas potential identified in the relevant licenses,” Dart chief executive John McGoldrick said.

The deal follows another for the energy company with French utility GDF Suez last year that will see Dart involved in drilling a total of up to six UK shale wells for as much as $80 million over the next two or three years, according to Dart.

Shares in the small-cap firms rallied yesterday morning, with Egdon Resources up 45 per cent, IGas 13 per cent higher and Dart Energy also up 13 per cent.

Britain’s shale gas resources are estimated to be large enough to reverse the country’s rising dependency on imports, but few wells have so far been drilled to see how much gas is extractable.

The British government also sees the prospect of shale gas exploration as an attractive way to boost revenues and has allowed handsome tax breaks for companies involved in the nascent industry.

Environmental groups strongly oppose shale gas fracking, a method whereby chemicals and water are injected underground at high pressure to break rock formations.

Protests last year halted drilling in the south of England.

“It’s ironic that a French-owned company is seeking to drill the UK for shale gas when it’s banned from fracking in France due to environmental concerns,” said Jane Thomas, a senior campaigner at the environmental group Friends of the Earth.

France’s constitutional court in October upheld a ban on hydraulic fracturing for shale oil and gas.

Britain has promised benefits to communities affected by shale gas exploration, with £100,000 in compensation to be available to local councils once exploration has begun.

* Reuters and Bloomberg News