Industry

Updated: Weald oil production could generate £52bn over 40 years – but thousands of wells needed

 

HORSE HILL FRACKING

Flow testing at Horse Hill. Picture: Eddie Mitchell

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”

It added:

“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”.

Summary figures

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)

Detailed figures

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.

WealdOilForecast table

Opponent’s response

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.”

Links

Kimmeridge Limestone Oil The UK opportunity, EY, April 2016

UKOG press release

Link to Frack Off blogs and film on Horse Hill and the Weald

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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30 replies »

  1. Ken. I’d like to think that we have come on a lot since the 1970s concrete high rise era. Although right ‘at the time’ we have now much more knowledge of the impacts of fossil fuels, and poor developments on people. In the seventies, climate change was not high on the agenda, and many people saw industrialization as a ‘good’ thing as it spoke of prosperity (for some).

    People in 21st century UK have a different mindset. They want to live in a safe place with clean air and safe space for their children. They are increasingly aware of the need to look after their environments and are no longer accepting the rhetoric from the government and business.

    The issue is that we need to leave this in the ground. We cannot continue chasing ‘money for the few’. The world has too much oil right now and it’s being dragged up as fast as it can be sucked out of the ground for fear that it will become ‘worthless’.

    The companies, many registered offshore and paying no UK tax, impacting on the lives of the population around these sites don’t care about the people, only profit. Like the early ‘businessmen’ of the US, they are happy to shoot all the buffalo and run.

  2. Sherwulfe, the issues about fossil fuels contribution to pollution and global warming were known as early as the 1960s: http://insideclimatenews.org/news/13042016/climate-change-global-warming-oil-industry-radar-1960s-exxon-api-co2-fossil-fuels?utm_source=Inside+Climate+News&utm_campaign=31739942f2-Quarterly_Re_send_w_Pulitzer_update4_19_2016&utm_medium=email&utm_term=0_29c928ffb5-31739942f2-327503973. It was an issue raised at the Club of Rome and the book ‘Limits to Growth’. Rachal Carson’s Silent Spring who in an article by NRDC: Carson was well aware of the larger implications of her work. Appearing on a CBS documentary about Silent Spring shortly before her death from breast cancer in 1964, she remarked, “Man’s attitude toward nature is today critically important simply because we have now acquired a fateful power to alter and destroy nature. But man is a part of nature, and his war against nature is inevitably a war against himself? [We are] challenged as mankind has never been challenged before to prove our maturity and our mastery, not of nature, but of ourselves.”
    Later on in the 1980s, we had the Brundtland report whose chair in her forward stated:
    “The present decade has been marked by a retreat from social concerns. Scientists bring to our attention urgent but complex problems bearing on our very survival: a warming globe, threats to the Earth’s ozone layer, deserts consuming agricultural land. We respond by demanding more details, and by assigning the problems to institutions ill-equipped to cope with them. Environmental degradation, first seen as mainly a problem of the rich nations and a side effect of industrial wealth, has become a survival issue for developing nations. It is part of the downward spiral of linked ecological and economic decline in which many of the poorest
    nations are trapped. Despite official hope expressed on all sides, no trends identifiable today, no programmes or policies, offer any real hope of narrowing the growing gap between rich and poor nations. And as part of our “development”, we have amassed weapons arsenals capable of
    diverting the paths that evolution has followed for millions of years and of creating a planet our ancestors would not recognize.”
    Future generations and ourselves, have all been seriously let down by our political elite!

    • Patrick, this a very good response. I like to think with the new awareness of the threat posed by Shale Gas extraction, more and more groups of people are looking at the consequences of our fossil fuel habit. Here’s hoping that this movement joins with the many voices calling for the regulation of this energy and exchanging it with renewable generation where possible and reduction in consumption. There will be a point of no return which is coming soon. In the words of Dr Suess ‘We are here!’.

  3. Comment posted on behalf of Steve Hill

    Your report on EY’s Weald oil report alleges BBC assumptions about the number of oil wells needed under the different scenarios.

    These are complete bunkum. First they base them on EY’s assumed 400 bd from one vertical well, which is absurdly low give the flow rates already achieved. But on that basis 30 wells could produce 12k bd for the low scenario, not 300!

    Secondly, one vertical octopus well could produce the 10k from one location. This is far more likely and in line with UKOG’s stated development intentions.

    In my view the EY is deeply flawed by underestimating the likely amount of oil in the Weald. Nutech has already estimated 90% probability of 8.1 bn barrels from the Horse Hill site alone and 61.8 bn for the whole Weald. And that was before the flow test results at HH.

    EY also say s that an oil pipeline would be prohibitively expensive. Have they even looked at the map of existing pipelines which run within a very few miles to Gatwick airport? It is deeply, deeply conservative!

  4. As usual there seems to be a load of speculation from people that really are not qualified to make comment. Yep, UKOG may want to ramp up the potential, but so much nonsense (such as the difficulty of installing buried pipe lines) that its painful. I have buried gas, electricity, water, sewage, and internet at my house, like most of the UK! Putting a pipeline in is easy!

    Sherwulfe, its great that you want to ‘keep it in the ground’ and I am sure that you will have no car, do not travel, and do not heat your house? Perhaps a ‘keep it in the petrol station and the gas pipe’ would be a better campaign? So many want a carbon free economy while driving a Chelsea tractor, and having 4 holidays a year!

    One thing is clear from your post, that you think this is the death of fossil fuels. When I can walk across the M 25 safely, in rush hour, as there are no cars, I will agree with you. However, the drop in the price of oil is due to oversupply and has been a long term phenomena. Boom and Bust! Long a feature of the oil/gas industry. When oil really starts to decline (due to supply issues, or legislation concerning climate change) then the price would rise. It is a potent source of fuel for planes, (which will not run on batteries, ever!) and great for chemicals as well as transport.

    Alas thats the world we live in, safe(largely), comfortable, and the most luxurious standard of living ever. Few will want to give that up, though I hope we will find a way to make renewables work for at least some of our needs.

    See http://www.withouthotair.com/ from the late great Prof Sir David MacKay for some sense on the issue.

    • As far as I can make out, his book is not peer reviewed and you are the one talking about the ‘science’. One of the problems today, is the fossil fuel industry taints everything. Even the food, is tainted by chemicals produced from fossil fuels. The air we breathe, is contaminated by the toxic by-products of burning fossil fuels. Which is leading to an increase in poor health outcomes and early deaths. Manchester, which no longer has any heavy industry, still has the lowest life-expectancy for males in the UK! Look down on Manchester, from the Pennines and you can see a brown haze over Manchester.
      So our addiction to the motor vehicle, is slowly killing us, as well as driving climate change. So, we have to come off our fossil fuel dependence and quickly. Because, we need to reduce our emissions now, not in 2025 or 2050. We also have to move away from our addiction to excessive consumption, which is not leading to a better quality of life.

  5. Ken. I am very puzzled by your response to my post.

    ‘I am sure that you will have no car, do not travel, and do not heat your house? Perhaps a ‘keep it in the petrol station and the gas pipe’ would be a better campaign? So many want a carbon free economy while driving a Chelsea tractor, and having 4 holidays a year!’ This is a childish response. Please try and respond to the posted comment rather than speculating on your strange perception of how we all live.

    If you are referring to this part of my post:

    ‘The issue is that we need to leave this in the ground. We cannot continue chasing ‘money for the few’. The world has too much oil right now and it’s being dragged up as fast as it can be sucked out of the ground for fear that it will become ‘worthless’.

    clearly you have missed the very important point I raised. This is not about giving up cars and other benefits we enjoy from energy. It ‘s about our energy management.

    I have not at any time mentioned that I ‘think this is the death of fossil fuels’. Clearly for the time being until technology improves fossil fuels will have to remain in the mix, all be it as minimal as possible. What we have in the world right now is more than enough oil and gas from reserves we have in place, we don’t need anymore. There is an argument that if we burn more than 40% of what we have now we will create an environment no longer fit for humans to survive. NASA’s figures for January and February show an alarming increase in global temperature, higher than anticipated. It’s time to take your head out of the sand and be afraid. We can only go someway to stemming the inevitable temperature rise, but we have to act fast. The time for talking is over. For the sake of everyone the oil and gas must be regulated and it’s use curtailed.

  6. So you want to ban extraction in the UK, on climate change grounds, while continuing to use fossil fuels? Hmmm… Not a tad hypocritical?

    What about the jobs, balance of payments, supply industry, taxation revenue, economic activity etc? Why import oil when we have our own? So many are upset about the steel industry problems, where there is oversupply, so why not let all the plants go bust? Thats the sensible economic thing to do yet we want the workers to have hope and a future. We have many N Sea oilworkers losing their jobs who have the skills to take up the task of the drilling.
    As for the safety of the process, its well understood, and the UK regulations are excellent so its low risk. How does ‘keep it in the ground’ work here, but not abroad, or in the N Sea?

    Its good that you talk of energy management, rather than the empty-headed ‘we can live on renewables’ campaigners, but why are you not campaigning to have the N Sea shut down? It would be the same thing, yet few would support that. Why is onshore oil so different?

    • Ken you seriously need to step into the 21st Century.
      Nothing the Govt or industry say will make onshore drilling acceptable.
      The Dash for gas is nothing else but a mad money making exercise and completely at odds with our commitment to lowering pollution levels.
      Your complete faith in best practice and regulation is quite frankly astounding and naive.
      Ken it really is time to get your head out of the clouds and join the rest of us trying to ensure a better future. Letting go and accepting that fossil fuels are not the answer is the first step. No amount of justifying will wash. We know to much now.
      Rather than barking into the wind perhaps consider joining the many and help us. We are a friendly lot and draw strength from the knowledge that there are so many of us striving for a fairer, healthier future. We love our island and no toxic wanton abuse of our countryside will ever be consented to.

      • Hi Julie, try having a look at http://www.withouthotair.com/

        Alas if I thought the industry would do half of the things that I see on anti sites, I would join you. However, as you well know, I am a debunker of nonsense, and I am afraid that is what anti arguments are. Why do so many esteemed organisations like Public Health England, Royal Society, Royal Academy of Engineering, EASAC, the EU, 30 US states, etc, find no real issues? Thats cos they look at the anti arguments and realise them for the sham that they are.

        Why did RAFF withdraw their advertising after my complaints? Same for Frack Free Somerset, FrackFreeAlliance, BCUK, + FrackFreeRyedale. They were unable to support their statements with science Julie. There may be more to come from this angle shortly Julie.

  7. Public Health England, is that the same organisation, that approved Peel Holdings plans for an incinerator in Trafford? This is despite accepting that would mean, the mortality rate in the area would INCREASE, with the building of the incinerator!
    As for the Royal Society (RS) and the Royal Academy of Engineering (RSE)? The RSE, of which Lord Browne was formerly a President of, and he is also a member of the RS? The same Lord Browne who sits in the unelected chamber of the House of Lords. Who was the chief executive of BP, involved with Cadrilla, now executive chairman of L1 Energy: http://www.pbs.org/wgbh/pages/frontline/the-spill/bp-troubled-past/

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