Total Finds Challenges with Progressing on French Shales

Total SA, France’s largest crude producer, has yet to find “doable” oil or natural gas from shale deposits in Europe, said Chief Executive Officer Christophe de Margerie.

Europe’s system of petroleum royalties, in which producers share revenue with the government, doesn’t benefit private landowners, de Margerie said at an event at the French Consulate in New York today. Landowners have no incentive to permit drilling, in contrast to the U.S. where they share in royalties, he said.

Total entered the U.S. shale-gas business in January, agreeing to pay $800 million for 25 percent of Chesapeake Energy Corp.’s assets in the Barnett Shale field in Texas. Total committed to spend another $1.45 billion to cover 60 percent of Chesapeake’s share of drilling costs. The company also has a shale-oil joint venture in the U.S., de Margerie said.

Europe is less accepting of shale production than the U.S., de Margerie said. Local groups are mounting opposition to Total’s shale-exploration plans in southern France because of potential environmental damage.

The Montelimar permit allows Total to search for shale gas in an area that spans 4,327 square kilometers (1,671 square miles) from south of Valence to areas around Montpellier. The government issued the five-year permit in March.

“We cannot drill,” de Margerie said today. “It is difficult to do anything.”

Research will continue, he said.

Source: Bloomberg