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Total becomes top producer to invest in UK shale

01.13.2014  | 

Total is looking to explore for shale outside France, where the hydraulic fracturing drilling method is banned. The company is already involved in shale projects in the US, where the boom in output has led the country to overtake Russia as the world’s biggest producer of natural gas.

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By TARA PATEL and NIDAA BAKHSH
Bloomberg

Total became the largest oil company to enter the UK’s shale-gas industry through a $47 million investment in licenses in eastern England.

Europe’s third-biggest oil producer will buy a 40% stake in two exploration areas held by Dart Energy, Paris- based Total said Monday in a statement. IGas Energy, which holds 14.5% of the permits, will become the operator.

Total is looking to explore for shale outside France, where the hydraulic fracturing drilling method is banned. The company is already involved in shale projects in the US, where the boom in output saw the country overtake Russia as the world’s biggest gas producer in 2009. Now Britain is offering incentives to open up its own shale industry as North Sea reserves decline.

“The entry of a major such as Total into the UK shale arena will give a significant boost to the nascent shale gas supply chain,” oil-services investor Epi-V said in a note.

The shale deal is the second in the UK by a French company. In October, GDF Suez, France’s biggest gas supplier, bought a 25% stake in 13 licenses in England’s Bowland Basin from Brisbane, Australia-based Dart.

Shale Incentives

British Prime Minister David Cameron has pledged millions of pounds to local authorities that approve shale developments, part of a drive to create jobs and attract investment. He faces opposition from environmental groups and local residents who say hydraulic fracturing, or fracking, may pollute ground water.

Once the Total deal is complete, Dart will own 17.5% of the licenses, which are part of the Gainsborough Trough and cover about 240 square kilometers (93 square miles). Egdon Resources will hold 14.5% and eCorp International LLC will have 13.5%, the companies said in separate filings.

Cameron has proposed that local governments keep 100% of the business rates they collect from shale-gas sites, double their current share, according to figures released by his office. That may equate to 1.7 million pounds ($2.8 million) in central-government funding for each site every year.

The UK is also offering lower taxes to spur drilling. The Bowland area, extending from east to northwest England, may hold as much as 1,300 trillion cubic feet of gas, the British Geological Survey says. That’s enough to meet demand for almost 50 years, based on an extraction rate similar to US fields.

Aside from Britain and the US, Total is involved in shale-gas projects in Argentina, China, Australia, Poland and Denmark. In its home market, the company is prohibited from exploring shale areas after France outlawed fracking in 2011.



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