Total deal speeds up shale gas race

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 which is bitterly opposed by environmentalists.

The French group said on Monday it had bought a 40% interest in two licences in the so-called Gainsborough Trough area of northern England for up to $48m.

Gas consumption

Total's involvement, which follows shale gas acquisitions 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 other major oil and gas companies to follow.

"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.

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.

Global warming

However, the technology - whereby chemicals and water are injected underground at high pressure to break rock formations - is bitterly opposed by environmentalists who fear it could pollute water, blight landscapes and add to global warming.

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% currently given, amounting up to £1.7m per site.