Oil production in the Weald in southern England could generate around £52 billion over 40 years, according to forecasts published today by EY.
But this would mean back-to-back drilling of production wells and, according to the BBC, 2,400 boreholes at 100 locations.
To develop an oil industry in the Weald would, says EY, require “streamlined and co-ordinated regulatory process” and “an effective relationship with local residents”.
The forecasts, commissioned by UK Oil & Gas plc, one of the investors in the Horse Hill well near Gatwick, suggest an oil industry in the Weald could create up to 5,607 jobs each year. Of these, around a quarter would be in the Weald region itself.
They predicted that during 40 years of production, the industry could pay up to £18bn in tax and up to £557m to local communities, assuming shale-type benefit schemes were established.
An opponent of onshore drilling have described EY’s figures as “highly dubious”. Even if the volumes were accepted, they were not nationally significant and did not justify the “destruction of the Weald. (See Opponent’s response at the end of this post)
Scenarios and assumptions
EY’s figures are based on a range of scenarios for exploiting oil in Kimmeridge limestones in the Weald.
The low scenario assumes what EY describes as “limited investment in, and extraction of, oil in the Weald”.
Under the high scenario, there would be development of oil from Kimmeridge limestones across the entire Weald basin.
EY’s report does not define the geographical area of the Weald. Nor does it describe in any more detail what it means by its low, mid or high scenarios.
It says the limestone would not be hydraulically fracked. But releasing oil would require acidizing. This involves pumping a solution containing reactive acid into a rock formation to improve the permeability and enhance production.
EY adds that its estimates are based on assumptions of well performance made before flow test results on the Horse Hill well were reported in February. These were described as “outstanding” (link to DrillOrDrop report) and EY says its forecasts of economic impact should “be considered as conservative”.
Number of wells
EY does not state how many wells would be drilled to achieve the forecast production figures. DrillOrDrop asked for this information from EY, UKOG and the PR company, Square 1 Consulting, but no one from any of the organisations was available to talk to us. We’ll update this post if we hear back from them.
In the meantime, the BBC’s John Moylan reported this morning that EY had assumed 300 wells in 25 locations for the low scenario and 2,400 wells in 100 locations for the high scenario.
To sink 2,400 wells in the Weald, oil companies would need to double the drilling rate of the past 40 years across the whole of the UK. Official data reviewed by DrillOrDrop in January (link to post) found there were 1,179 wells drilled from 1976-2015. The average number drilled per year was 29, ranging from a high of 71 in 1986 to 8 per year in both 2015 and 1976.
“Efficient regulation” and “effective relationships” needed
Stephen Sanderson, executive chairman of UKOG, said this morning:
“This Report confirms UKOG’s view that the development of Kimmeridge Limestone oil in the Weald Basin can make a very significant contribution to the economy, employment and energy security of the UK.”
But EY said:
“The development of an onshore Kimmeridge Limestone Oil industry will require efficient regulation, and back-to-back drilling of production wells. The current regulatory environment is complex, with four different key regulators involved in the regulation of the onshore oil industry. A streamlined and co-ordinated regulatory process would aid the development of an onshore oil industry in the UK”
“Companies will need to develop an effective relationship with local residents to explain the exact nature of the development, i.e., the difference between Kimmeridge Limestone Oil and shale oil, and highlight the potential benefits to the area, as well as taking steps to mitigate any negative impacts of the development such as chosen truck routes to and from the wells”.
Total production in barrels: 140m (low) to 1,125m barrels (high) over 40 years
Average daily production in barrels: 10,000 (low) to 72,000 (high)
Gross value added by oil operations: £7.1bn (low) – £52.6bn (high) over about 40 years
Total community benefit: £77m (low) to £557m (high) over about 40 years
Jobs created/year: 994 (low) to 5,607 (high)
Tax paid over about 40 years: £2.1bn (low)to £18.1bn (high)
Business rates @ 2% of gross revenue over 40 years: £140m (low) to £1,035m (high)
EY’s report did not provide all the data for low, mid and high scenarios. We have compiled this table from data in the report and the press release.
Andrew West, a campaigner with the group Frack Off, said:
“The main threat from the test well at Horse Hill and this forecast from Ernst & Young is that they provide the companies involved with data and a narrative. If this remains unchallenged it will allow them to secure more investment and advance their tight oil plans drilling more wells on more sites in the South East.”
“Given the massive costs involved in tight oil exploitation it is highly unlikely that any of the small UK companies will ever produce much oil in the Weald. What they are trying to do is to create a ‘speculative scenario’ and then sell out to a much larger company while avoiding any real detail or discussing the impacts of production.”
“Ernst & Young’s total production figures (even if you accept them at face value as being achievable) would require the drilling of thousands of wells. The low scenario production figure of 140 million barrels would require 1,120 wells, the high scenario 1.1 billion barrels requires 9,000 wells. We have based our estimates on a generous 125,000 barrels from each tight oil well, these figures are taken from a USGS report (link see continuous oil).”
“With regard to the number of sites, most U.S. tight oil sites only have 2 wells on them. Multi well unconventional oil and gas sites with 12 – 24 well per sites have been drilled but they are un-common. Even at 24 well per site the low scenario requires 47 sites across the Weald and the high 375 sites (along with pipelines, processing plants, waste facilities and tens of thousands of HGV movements per site!).”
“The total production figures must also be put into perspective with UK oil consumption and timeframe. UK oil consumption is around 550 million barrels each year.” (link to source)
“The low scenario provides the UK with just 3 months oil, the high scenario 2 years oil. Spread over 40 years this provides just 2 or 19 days of UK oil consumption each year. More oil would require even more wells and sites, more effective production would require more energy, resources and produce more waste.”
“This is just enough oil on paper to make a few people rich but the figures are highly dubious and even if you accept them they are not nationally significant and certainly do not justify the destruction of the Weald. If communities living in the Weald are opposed to a massive unconventional drilling campaign then every small step along the way needs to be fought tooth and nail.”
Stake in Horse Hill
UKOG also announced this morning it acquired the 7.8% stake of Angus Energy Holdings UK Ltd in the Weald Basin licences PEDL137 and PEDL246. The PEDLs include the Horse Hill well near Gatwick Airport. The announcement brings UKOG’s interest to 27.3%. Link to UKOG announcement
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