Total buys stake in UK shale gas sector

French company Total has become the first oil and gas major to buy into the UK shale gas market.

The energy giant has acquired a 40 per cent interest in two shale gas exploration licences in the UK which are in the Gainsborough Trough, an area of 240 km2 in England’s East Midlands.

Total has not revealed the level of investment, but it is believed to be around $45m.

Patrice de Viviès, Total’s senior vice-president for Northern Europe, said the acquisition of the licence stakes was an important milestone for Total E&P UK and opens a new chapter for the subsidiary in a promising onshore play”.

He said the group was already involved in shale gas projects in the US, Argentina, Australia, China and in Poland and Denmark, “and will leverage its expertise in this new venture in the UK”.

On completion of the transaction, Total’s partners in the project will be Dart Energy Europe subsidiary GP Energy Limited (17.5%), Egdon Resources UK (14.5%), Island Gas (14.5%) and eCorp Oil & Gas UK (13.5%).

Island Gas (IGas) will be the operator of the initial exploration programme, with Total subsequently taking over operations as the project moves towards development.

Total E&P UK is already active in the UK and it says that the new shale deals will see it become the largest oil and gas producer in the country by 2015. Its current developments include the West Franklin Phase II and Laggan-Tormore projects, both of which are scheduled to start up in 2014.

In a sweetener to allow shale gas exploration drilling, the government today revealed that local councils will be able to keep 100 per cent of all business rates collected from shale gas sites – currently the figure is 50 per cent.

Figures from the Department from Energy and Climate Change say that this could be worth up to £1.7m a year for a typical site.

The move has been welcomed by the Confederation of British Industry. Nicola Walker, the CBI’s director for business environment, said: “This announcement is important for councils that want to make the most of shale gas investment and ensure the benefits are felt at a local level. Shale gas has a vital role to play in diversifying our energy mix and the government is right to make investment more attractive.

“Shale gas exploration will help keep the lights on while bringing much-needed jobs to local communities, but it will not be the silver bullet that solves all our energy needs.”

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