* First oil major to enter British shale gas race
* Shares in Total partners IGas, Egdon Resources surge
* IGas to remain operator until development phase
* Environmental groups oppose shale gas drilling
* Govt offers better business rates from shale to councils
(Adds link to graphic, background)
By Karolin Schaps
LONDON, Jan 13 Total has become the
first major oil and gas company to strike a deal to explore for
shale gas in Britain, boosting a technology which has brought
cheap energy to the United States but sparked protests by
environmentalists and local communities.
The French group said on Monday it had bought a 40 percent
interest in two licences in the so-called Gainsborough Trough
area of northern England for up to $48 million.
Total's involvement, which follows shale gas deals by
utilities Centrica and GDF Suez, puts Britain
firmly on the map as one of Europe's strongest prospects for the
development of unconventional oil and gas resources.
The investment is tiny in industry terms, but experts say it
paves the way for similar moves by other top oil and gas firms.
"We expect further international energy companies to follow
the lead taken by Total (...) and ramp up their plans for
signing 'farm-in' agreements with UK firms that already have
licences to explore UK shale reserves," said Glynn Williams,
partner at Epi-V, an investor in oil and gas services.
However, shale gas extraction or "fracking" - using
chemicals, water and sand injected underground at high pressure
to fracture rock formations and release the gas - is bitterly
opposed by environmentalists who fear it could pollute water,
blight landscapes and add to global warming.
Last summer, Britain saw protests erupt in the south of the
country as local communities expressed opposition as well.
Britain's shale gas resources are estimated at more than 400
times the country's annual gas consumption and the government
has thrown its weight behind exploration at a time when rising
energy prices have become a hot political issue.
In the United States, shale gas exploration has transformed
the energy market, caused prices to collapse and set the country
on the path towards energy independence.
Tighter planning and environmental regulation, and denser
population, mean Britain is unlikely to see a shale gas boom of
the kind experienced in the United States.
Nonetheless, the British government supports shale gas
exploration as a way to reduce the country's growing dependence
on gas imports and to increase revenues.
It has allowed handsome tax breaks for companies involved in
the nascent industry and promised financial benefits to local
communities affected by shale gas exploration.
The government also announced on Monday that local councils
will be able to keep all of the business rates to be received
from shale gas sites, instead of 50 percent currently given,
amounting up to 1.7 million pounds per site.
"A key part of our long-term economic plan to secure
Britain's future is to back businesses with better
infrastructure. That's why we're going all out for shale," Prime
Minister David Cameron said, announcing the new rates.
The British government's support for shale gas makes it one
of Europe's most attractive markets for unconventional oil and
gas drilling as others, such as France and Germany, have imposed
moratoriums on the activity.
"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, 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.
Poland, which also actively encourages shale gas
exploration, has seen a raft of oil and gas companies
withdrawing from its programme due to poor drilling results and
an uncertain legal landscape.
In contrast, Britain's first shale gas is planned to flow by
the end of this decade and growing momentum behind the shale gas
race is expected to attract other big names to the UK market.
Following last summer's protests against shale gas, the
government promised improved benefits for communities affected.
Communities are expected to receive 100,000 pounds
($164,800) in compensation as well as a separate fund
established by the developer equalling 1 percent of revenue per
shale gas well drilled. The compensation scheme starts when
exploratory drilling begins.
France's GDF Suez bought shale gas licence stakes in a
partnership with Dart Energy in October and Britain's Centrica
entered the race in June.
Having Total 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 on the two projects in northern England.
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 firms said.
The news confirms a weekend Reuters report.
Shares in the small-cap firms climbed in morning trade, with
Egdon Resources up 45 percent, IGas 13 percent higher and Dart
Energy also up 13 percent. Total shares were off 0.6 percent.
($1 = 0.6066 British pounds)
(Additional reporting by Sonali Paul in Melbourne, Leila Abboud
in Paris and Paul Sandle in London; Editing by Mark Potter)