Total SA has entered into the UK shale gas arena through the purchased of 40% interest in two shale gas exploration licenses in the UK, paying $1.6 million in back costs and the funding of a fully carried work program of up to $46.5 million.
Licenses 139 and 140 cover 240 sq km in the Gainsborough Trough area of the East Midlands region of the UK.
Total has the option to exit after an initial period of the program corresponding to a minimum commitment of $19.5 million.
The program includes the acquisition of 3D seismic; the drilling and testing of a vertical exploration well and associated well pad construction; and the drilling and flow-testing of a second appraisal horizontal well, which is conditional on the success of the testing of the exploration well.
Total's partners in the project include GP Energy Ltd., a Dart Energy Europe subsidiary, with 17.5%, Egdon Resources UK Ltd. 14.5%, Island Gas Ltd. (IGas) 14.5%, and eCorp Oil & Gas UK Ltd. 13.5%.
John Francis Thrash, chief executive officer of eCorp International LLC, said, "From a North American shale E&P perspective, this very compelling prospect has many of the physical attributes of the best basins in the US. From a shale [mergers and acquisitions] perspective, the transaction, which represents about 1% of our UK-Europe holdings, is a quantum leap in value creation."
IGas will be the operator of the initial exploration program, with Total taking over operatorship as the project moves toward development.
IGas said completion is expected to take place no later than June 30.
Total, which touts 105,000 boe/d in UK production in 2013, said it will become the UK's largest oil and gas producer by 2015, with investments totaling $2 billion. The company has had a presence in the UK since 1962.
"[Total] is already involved in shale gas projects in the US, Argentina, China, Australia, and in Europe in Poland and in Denmark, and will leverage its expertise in this new venture in the UK," said Patrice de Vivies, Total senior vice-president, northern Europe.
The company's current UK projects, both slated for start-up this year, include West Franklin Phase II in which Total is operator at 40,000 boe/d capacity, and the Laggan-Tormore project in which Total is operator at 90,000 boe/d capacity, in the West of Shetland area.
More than 90% of Total's production in the UK comes from several operated fields in the Alwyn zone in the northern North Sea and the Elgin-Franklin zone in the central Graben.
Total last year restarted production of gas and condensate on the Elgin-Franklin complex after it was shut off in 2012 because of a gas leak on the G4 well (OGJ Online, Mar. 11, 2013).