What The Gatwick 100 Billion Barrel Oil Bonanza Actually Means
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Onshore Oil and Gas
Last week, British firm UK Oil and Gas Investments (UKOG) announced they had discovered as much as 100 billion barrels of onshore oil in South East England. That is more than the proven oil reserves of Kuwait, the world’s sixth largest holder of crude oil.
Whilst this seems like a Doctor Evil-like arbitrary number selection, it is a very serious one indeed for onshore oil and gas. In the following piece look at the raw statistics and try to extrapolate what the Gatwick Oil Bonanza will actually mean for industry and citizenry alike.
Read More: Oil Price: The Top 25 Events That Rocked The Cost Of Crude Oil
Where?:
- UKOG’s exploratory well, Horse Hill-1 (HH-1), is located on the border of the South Eastern English counties of Surrey and East Sussex, three kilometres north of the UK’s second airport, London Gatwick.
- Part of the Weald Basin, spanning the English counties of Kent, Sussex, Surrey and Hampshire.
- HH-1 is the deepest well to have been drilled in the area for 30 years, with a targeted vertical depth of 8,680 feet (2645 metres)
How much?
- Deposits from the well have been analysed and an estimate of 158 million barrels per square mile has been reached, roughly 100 billion barrels in total.
- TECHNICAL WARNING: About 72 per cent of the oil in place lies between 2500-3000 feet (762-914 metres) within the Upper Jurassic Kimmeridge interbedded limestone and mudstone sequence.
OK, how much really?
- Although 100 billion barrels are in place, estimated recovery factors of between three and 15 per cent can be achieved using conventional technology.
- That means actual produced oil would lie anywhere between 3-15 billion barrels.
- In context, oil produced on the UK Continental Shelf (UKCS) has totaled 45 billion barrels in the past 40 years.
- Flow tests to be conducted later this year will determine how producible the resource is and its net size.
When?
- This is governed by several factors, most notable of which are the oil price and red tape. Onshore oil will be not be commercially viable with the value of a barrel of Brent crude hovering around the $50-$60 mark.
- On top of that, the likelihood of public demonstration against drilling in verdant pastures, plus the protracted process of applying for planning permission for drilling and development could mean it is years until production begins.
So what does this mean for:
The UK economy?– Not much. Although oil extraction has been a massive tax boon for the national exchequer since North Sea oil started flowing, the amount of oil in play will only have a minor influence on overall government revenues.
Prices at the pump? – Next to nothing. Once online, this new resource will be a mere drop in the ocean of oil produced around the globe on a daily basis. The real bellwether for gasoline on the forecourt is the global oil price, determined by the top 10 oil producing nations who collectively output more than 60 per cent of the 85 million barrels produced worldwide every day. In comparison, the UK produces approximately one per cent of the daily global total.
The British onshore oil and gas sector? – A welcome boost. According to a recent report from the UK Office of National Statistics, UKCS oil companies had a net rate of return of 10.4 per cent, the lowest estimated rate in 17 years. The potential of a new onshore oil and gas centre could be a particular boost for oil ailing services companies, due to the size of the find.
