Total SA of France has become the first oil major to back shale gas exploration in Britain by announcing that it will commit £30 million to advance drilling projects in Lincolnshire. Total will pay $1.6 million in back costs and fund a work programme of up to $46.5 million, with a $19.5 million minimum commitment. This is a very small investment in the context of the O&G industry generally but is being seen as pivotal to the UK government’s plans to advance fracking, which could meet the entire country’s energy needs if just ten percent of currently estimated reserves of shale gas could be recovered.
Following the farm-out deal with the junior partners,Australian coalbed gas specialist Dart Energy, eCORP of the USA and UK AIM listed companies IGas Energy and Egdon Resources, the UK government is clearly boosted by this indication that its incentives for developing unconventional oil and gas reserves are working. Shares in Egdon rose 45 percent to 13.55 pence this morning, while IGas Energy was up 15 percent to 124 pence.
When shale gas started to take off in the USA the majors waited over five years before investing: in contrast the UK is achieving this while the industry is at an early stage.
With a possible 74,000 new jobs to be created the coalition government is keen to fast track exploration and development of shale gas and to defuse opposition from environmentalists. Prime Minister David Cameron has now promised local councils that back fracking will be allowed to keep all the business rates it collects from shale gas projects rather than the usual 50 percent.