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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31 replies »

  1. This is what most ordinary folk don’t grasp. To get the stuff out of the ground in any viable quantity means total devastation of vast swathes of the countryside. 2,400 wells! Absolutely unthinkable!

  2. How awful for the Weald and its inhabitants. Humans and flora and fauna! This is the complete and utter industrialisation of our precious and rare natural habitat. The U.K. Is a small yet densely populated island. This kind of industry should not exist here. Frack off to the desert and focus on Renewables here instead. If you don’t have the technology go to China and learn. This kind desperate and toxic method tof extracting oil even caused an earthquake in Lancashire not that long ago. Luckily for the industry, people have short memories.

  3. I am not sure where the above two commentators have got their info from but there is little content to your comments.

    1. Fracking is not proposed, the formation is already naturally fractured. Acid stimulation is a total norm in the oil business. This is oil shale, and natural limestone, not fracked shale gas.
    2. There are 100 wells from 10 wellpads in Wytch Farm in Poole harbour. Nobody knows they are there. They are strictly regulated in terms of visibility, and are surrounded by trees. The oil is piped away to Southampton, and there is very little impact.
    3. Any drilling has to pass planning laws, so any ‘industrialisation’ would be rejected. With horizontal drilling the surface impact is small. ‘Total devastation’, where do you get that idea. There are already many oil wells in the Weald.
    4 ‘Toxic’ Jack? Toxic chemicals are not permitted in the UK

  4. It will be interesting to see how they arrived at the very high well counts using a production rate of 400 bopd per well and the peak and average field production rates for the 3 scenarios.

    • EU estimate is based on assumption of flow rate of 400 bpd from one stimulated horizontal well. This is prior to recent Horsehill data which show unstimulated flow rate of 1300 bpd from a vertical well. At this flow rate from an unstimulated vertical well surely with a stimulated horizontal well it would be more productive at EU high scenario estimate with less wells required.

  5. Ernst & Young, one of the big 4 auditing firms, which did not find any issue with the failed banks! Still embroiled in scandal and tax-avoidance schemes! Can we take anything they publish seriously? And none of this addresses the urgent action, required to catastrophic climate change and the need to keep fossil fuels in the ground?

    • Jack, we can all find terrible emotive images and articles, thanks to Mr Google.
      Windfarms? try http://c1.vgtstatic.com/pic/2761.jpg
      Biogas? try http://www.dailymail.co.uk/news/article-3511059/Julie-Walters-war-biofuel-plant-near-rural-idyll-Actress-blasts-facility-killing-wildlife-emits-stench-strong-people-t-sit-gardens.html
      Solar? http://www.ucsusa.org/clean_energy/our-energy-choices/renewable-energy/environmental-impacts-solar-power.html#.VxXjedUrLnA

      There is no issue with the definition of fracking as all of the environmental safeguards are the same. The Environment Agency will not issue drilling licences if the operator does not pass all of the stringent tests concerning environmental protection, wellpad sealing, cementation etc. The rules are the same, and best practice is required. As the article in the Guardian states (from UKOOG) ‘However in any event the same regulatory environment applies for well integrity whatever volume is used. In addition operators will have to apply for environmental permits which will also include the chemicals being used.’

      So again, its no issue at all, but why this is being discussed in an article about a normal shallow oil well is beyond me

      • What dealings have you had with the Environmental Agency (EA)? I know from past experience, working on a Energy from Waste (which is not a green way to produce electricity) plant. The EA, was willing to turn a blind eye to serious environmental issues. In fact, their monitoring of atmospheric emissions, were really not ‘fit-for-purpose’. Their own disregard to regulations (and is is left to self-regulation), allowed United Utilities to dump radioactive wast into the Manchester Ship Canal. Years earlier, they allowed some they had brought convictions against. To continue operating, leading to 5 mountains of fridge/freezers to build up in Greater Manchester. Which resulted in at least 4 large fires, putting fire-fighters and public at risk, whilst adding to Greenhouse gas emissions!
        As for the oil & gas industry safety record, there are numerous incidents, which never make the news. The Health and Safety Executive do record incidences reported to them: http://www.hse.gov.uk/offshore/statistics.htm. But how many go unreported? And I have read some, where there has been discharges to sea, that the EA has dismissed as not environmentally damaging! For some reason, I cannot find anything about onshore oil and gas installations?

  6. Ken. 2400 wells divided by 100 wellpads equals 24 wells per pad, that’s 150% increase on Wytch Farm in Poole harbour site, therefore 150% increase in imapct. I’d say that’s industrialization…..

    • So what is the issue Sherwulfe? They can squeeze quite a lot of wells in a small area, and the surface impact is pretty much the same. Did you see the jpg I posted above?
      The only issue would be that drilling would be going on for some time. It has to be said that the wells are very shallow, and so can be drilled quickly. Wytch farm was developed from the 1970s remember, and as far as I know there has been no protesting about it. There have been one or two rigs sticking up over the trees for decades. Kayaking around Poole harbour recently, the visual impact of the rigs is pretty well zero, whereas looking towards Poole… well… there is massive human impact. The noise was imperceptible as well.

      I am afraid there is a load of concern about nothing of any great significance, except for jobs, balance of payments, and tax revenue. A bit like the whole shale gas debate, where people who do not understand the process get excited about fake scare stories, put about by groups like Greenpeace PLC, and Fiends of the Earth. .

  7. Can anyone explain the maths of 2,400 wells, average well rate 400 bopd, and the 72,000 bopd average daily production (high case)? Seems there are far too many wells being quoted. The well numbers are not in the EY report, only on the BBC article, they are not in other articles in newspapers either. The other cases do not add up either.

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