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Total deal speeds up UK shale gas race

By Reuters - Jan 14,2014 - Last updated at Jan 14,2014

LONDON — 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 this week it had bought a 40 per cent 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.

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.

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