A small British oil company has found a bonanza of potentially billions of barrels of oil beneath a field near London’s Gatwick Airport. The only problem is how much of the oil is accessible.
U.K. Oil and Gas Investments (UKOG) said Thursday that 3,000 feet of exploratory drilling at Wytch Farm in the Weald Basin, a rural area just north of the airport, discovered a “world-class potential resource.” The area is now referred to as “Britain’s Dallas.” It was the deepest well dug in the region in three decades.
“We think we’ve found a very significant discovery here, probably the largest [onshore well in the U.K.] in the last 30 years, and we think it has national significance,” UKOG Chief Executive Stephen Sanderson told the BBC.
UKOG said an analysis of the deposit, called Horse Hill-1, shows it may contain up to 158 million barrels of oil per square mile, indicating that the entire well may hold as much as 100 billion barrels of oil, 10 times larger than previous estimates.
The Weald Basin rivals the entire oil reserves of Kuwait, which sits over 101.5 billion barrels of crude. And the site may prove to be more productive — and easier to work — than North Sea wells, from which Britain has produced about 42 million barrels in the past 40 years. The North Sea is a leading source of oil for Britain, but has become less productive in the past 15 years.
Despite enthusiasm about the find, Horse Hill-1 may not yield as much oil as it holds, according to Mike Jakeman, a global commodities analyst at the Economist Intelligence Unit, a subsidiary of the magazine The Economist.
“Although the numbers sound good, this discovery is unlikely to prove a significant tonic for the U.K. energy industry,” Jakeman said. He said oil is locked in underground shale and therefore expensive to extract. With oil prices depressed, energy companies are more interested in wells where production is more affordable.
UKOG counters that the shale in the Weald Basin is “naturally fractured” and therefore the oil is accessible through conventional drilling.
Alastair Fraser disagrees. The professor of petroleum geoscience at Imperial College London calls the geology of the Weald Basin “rather unfriendly” because the rock is exceptionally impermeable, making even fracking more difficult.
In fact, even Sanderson, UKOG’s chief executive, acknowledges that only between 3% and 15% of oil is recoverable from shale deposits that are similar to those in the Weald Basin.
Geology is one big hurdle, and neighbors of Wytch Farm may be just as daunting. At least some opposition is expected to extensive drilling in an area that covers more than 4,000 square miles of southern England.
“Some of the most prospective plays are in environmentally sensitive areas, in National Parks, Areas of Outstanding Natural Beauty or under towns and villages,” said a report by the British Geological Survey (BGS), a partly publicly funded research organization.“Shale oil exploration and potential development should progress cautiously to ensure the activity is safe and the environment is properly protected.”
Originally written for OilPrice.com, a website that focuses on news and analysis on the topics of alternative energy, geopolitics, and oil and gas. OilPrice.com is written for an educated audience that includes investors, fund managers, resource bankers, traders, and energy market professionals around the world.
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