Last week Total, the French oil major announced its plans to invest in UK shale. It is the first major oil company to do so along with partners Igas, Egdon Resources, Dart Energy and Ecorp.
Total has acquired a 40 percent stake in two exploration licences in the East Midlands area at a cost of just under $50 million. Share prices for Igas rose 40 percent from 107 to a high on Friday of 153 pence. Egdon Resources went from hovering around 9 pence to finishing on Friday at just under 25 pence – over 160 percent increase.
Igas was formed in 2004 and is one of the few pioneers in shale that is producing oil and gas from conventional fields. Furthermore, its largest shareholder is CNOOC (China National Offshore Oil Corporation), which owns 20 percent of Igas.
Other oil majors are unlikely to follow, Shell’s CFO Simon Henry said last year it had no desire to be “first in and be in the headlines every day in the UK”. This month they have recently announced a profit warning. BP also expressed that it will not enter the market and could do without controversy after its PR bruising from the Gulf of Mexico oil spill.
This leaves the market open to UK suppliers such as Centrica who in June committed up to £160m in a deal to take a 25 percent stake in Cuadrilla’s licences to consolidate the market.
The government has provided further support by allowing councils to keep 100 percent of the business rates, on top of the tax on profits reduced from 62 percent to 30 percent.