Great news broke yesterday.
It’s a massive new oil find – said to extend up to 100 billion barrels. It dwarfs the North Sea.
You would have thought such news would have been widely hailed. But instead on the BBC website yesterday it triggered a ferocious, ill-tempered outpouring of disbelief, bile, ridicule and scorn.
So what’s wrong with it? It’s in England, that’s what. And it’s in the middle of wealthy south-east suburbia.
The news comes from a tiny exploration firm, UK Oil and Gas Investments, quoted on the junior ‘AIM’ market of the Stock Exchange. Analysis of a well it drilled at Horse Hill, near Gatwick Airport, suggests the local area could hold 158 million barrels of oil per square mile.
The potential total of 100 billion barrels would be 10 times bigger than the biggest oil field found in the last 20 years in the North Sea and compares with a figure of about 45 billion barrels produced from the North Sea in 40 years.
Cue an explosion of cross-border taunting and exchange of sneering blogs on the BBC News website. English bloggers hailed the prospect of oil independence and a mighty put-down for the “it’s oor oil” SNP. Scots retaliated with charges that the new find might help make good the billions of pounds of North Sea oil revenue that successive Westminster governments have squittered since the 1970s
In between these, anti frackers, environmentalists and Green campaigners railed at the despoliation and setback to renewable energy it would bring.
Good news to cheer us all? Not much, it seems.
And certainly not after the company’s own caveats kick in.
Even if the find is confirmed and production is feasible, only a fraction of that “up to” 100 billion total would be recovered, UKOG admits. Further drilling and well testing will be needed to prove these initial results.
There can be a world of difference between estimates of reserves and actual extraction achieved. And planning and environmental objections are likely to prove formidable. Compared with similar geology in the US and West Siberia,
UKOG estimates that 3% to 15% of the oil could be recovered. The majority of the oil lies within the Upper Jurassic Kimmeridge formation at a depth of between 2,500ft (762m) and 3,000ft (914m).
That’s deep, by any standards. And last year, a report for the government by the British Geological Survey estimated that the region may have shale oil resources in the range of 2.2-to-8.5 billion barrels, with a central estimate of 4.4 billion barrels of oil. Nevertheless, UKOG says that it drilled the deepest well in the region in the last 30 years and that the results “comprehensively change the understanding of the area’s potential oil resources”.
Says Stephen Sanderson, UKOG’s chief executive, “Based on what we’ve found here, we’re looking at between 50 and 100 billion barrels of oil in place. “We believe we can recover between 5% and 15% of the oil in the ground, which by 2030 could mean that we produce 10%-to-30% of the UK’s oil demand from within the Weald area. “We think we’ve found a very significant discovery here, probably the largest [onshore in the UK] in the last 30 years, and we think it has national significance.”
Even taking account of the qualifications, the sound of gushing oil in the Home Counties would be music to the ears of the cash-strapped UK Treasury – and it has already fired up the geo-political rammy between Scotland and the rest of the UK.
With the Brent crude spot price still languishing at $57.15 and North Sea oil revenues unlikely to being in much more than £700 million in 2015-16 – a far cry from those £6.8 billion projections during the independence referendum – any extra oil revenue would be a godsend.
And it could ultimately work to leave English voters less apprehensive about the consequences of a future UK break-up. Oil has been produced onshore in the South of England for decades.
There are currently around a dozen oil production sites across the Weald, a region spanning Kent, Sussex, Surrey and Hampshire. Most of the extraction is by “nodding donkey”. And not all encouraging geological readings result in a successful strike.
Back in the early 1980s I was invited by a junior oil company to witness the final stages of drilling on a promising field not far from Wytch Farm. The manager stood with apprehension as close as he dared. The journos, some yards behind, stood with notebooks ready and pens poised. The drill was sunk the final few feet. Then “clunk” ” – nothing. Dry hole!
However, despite all these caveats and the cautious wording of the announcement to the Stock Exchange, shareholders in UKOG may well feel the oil is gushing already.
Shares in the company, which has a 20.36 per cent interest in the Horse Hill licences, rocketed by 169 per cent yesterday - to 2.975p! This development alone was enough for some on the BBC website to question the credibility of the announcement.
And this latest discovery, if accurate and capable of exploitation, will bring political headaches of its own.
The oil is sitting under wealthy residential suburbs and protected environmental areas and environmental pressure groups will almost certainly put up fierce resistance. Good news in a cash-strapped world and with everyone wanting lower petrol prices?
Dream on. In today’s jaundiced mood across the UK, it seems just about everything is wrong with it.