UK fracking boom gathers pace – Govt offers tax breaks; oil major Total pays R500m for licences

Where America goes, Britain's business-friendly Conservative Party Government tends to follow. And as evidence of benefits from the US's shale gas boom grows, so too is political support for rapidly developing the rich shale gas deposits in the UK. Over the weekend, British Business Minister Michael Fallon published a strong pro-fracking argument in mass market Sun newspaper, likening its benefits to those the nation derived from North Sea oil. Fallon said shale gas has the potential to lower energy costs for "hard-working families and businesses." His boss, Prime Minister David Cameron escalated the campaign this morning. A statement from his office promises local councils they will keep around R20m a year in tax receipts from each shale gas development in their area. Shell has tied up a large slug of the South African opportunity in the Karoo. In the UK, though, oil majors are starting to scramble for a their part of the promised bonanza. As the Reuters story below reports, the first of them, France's Total, has paid over R500m to stake its claim. – AH  

By Karolin Schaps

LONDON, Jan 13 (Reuters) – France's Total today became the first oil and gas major to enter Britain's shale gas market by acquiring a 40 percent interest in two licences in northern England for up to $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 Ltd, 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.

The news confirms a Reuters report over the weekend.

Shares in the small-cap firms rallied on Monday morning, with Egdon Resources up 45 percent, IGas 13 percent higher and Dart Energy also up 13 percent.

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.

STRONG OPPOSITION

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

"It's ironic that a French-owned company is seeking to drill the UK for shale gas when it's banned from fracking inFrance due to environmental concerns," said Jane Thomas, senior campaigner at 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 pounds ($164,800) in compensation to be available to local councils once exploration has begun.