UK Oil & Gas confirmed today it had more time to drill in two southern England exploration licences, where no work has yet been carried out.
In a statement to shareholders, the company said the regulator, the Oil & Gas Authority, had extended the initial, or exploration, terms of licences in Surrey and the Isle of Wight.
The company’s chief executive, Stephen Sanderson, said:
“These extensions, on key appraisal and exploration assets, will permit UKOG to carry out its stated multi-well drilling campaign within the initial term of both licences.”
Opponents of UKOG’s operations in the licences criticised the Oil & Gas Authority (OGA) for the extensions, saying it had breached its own rules for the benefit of oil and gas companies.
Under the regulations, initial terms are currently set to last five years. Companies that do not comply with work commitments to explore for oil or gas could lose the licence. But usually, the OGA extends the duration of the initial term.
Surrey: seventh extension
The initial term of UKOG’s Surrey licence, PEDL143, near Dorking, appears to have been extended for a seventh time. But no exploratory drilling or testing has been carried since the licence was granted in 2004.
The initial term was originally set to expire in 2010. There have since been extensions in 2010 (two years), 2012 (one year), 2013 (two years), 2015 (one year), 2016 (two years) and 2018.
The extension in 2018 put the end date of the initial term at 30 September 2020. It now stands at 30 September 2022.
UKOG took over operation of PEDL143 from Europa in March 2019. This followed the cancellation of the lease of a drilling site in the licence near Leith Hill, by the then environment secretary, Michael Gove.
The licence was known as Holmwood in the industry, after this part of the Surrey Hills Area of Outstanding Natural Beauty (AONB).
Since then, UKOG has changed the licence name to A24 (after the local road).
It said today it was evaluating “multiple potential new drilling sites” outside the AONB. Drilling was scheduled to follow directly after what UKOG called its nine-well drilling programme.
UKOG has planning consent for two wells at its Horse Hill site in Surrey (HH1z and HH2). But other proposed wells at Horse Hill (HH3, HH4, HH5 and HH6), along with those at Dunsfold and on the Isle of Wight do not have planning permission.
“Ridiculous licensing system”
The local campaign group, A Voice for Leith Hill, accused the licensing system of contributing to the “blight” of local communities.
Dorking resident, Lucy Barford, from the group, said:
“This licence extension shows how ridiculous the licensing system is for onshore oil and gas. Oil companies seem to be able to continue to blight local communities by threatening to drill for oil and gas even when they’ve failed over a long period to get public support for their schemes.
“If UKOG proceed with their plans it’s likely to involve unconventional, horizontal or slanted drilling, meaning environmental impacts that are very worrying.
“Over 100,000 people were concerned enough about the original plans at Leith Hill to sign a petition about the threat to drinking water.
“This licence should be put on the scrap heap so that this beautiful area and the clean air and water on which we depend are no longer put at risk by money grabbing oil prospectors”.
Isle of Wight: initial term still has two years to run
UKOG’s Isle of Wight licence, PEDL331, was one of 93 issued under the most recent 14th round in 2016. No drilling work has been carried out so far on the licence but the initial term was not due to expire for almost two more years. It has now been extended to 20 July 2023, UKOG said.
UKOG describes PEDL331 as a “premier appraisal stage asset”. It has estimated that the licence, known by the company as Arreton, contains 14.9 million barrels of recoverable prospective resources for the company.
The licence has focused on three sites: Arreton Main, South and North. But UKOG has also said there is a further undrilled anticlinal, structure, the Arreton East Prospect, which is “many times larger”.
UKOG said today its proposed Arreton-3/3z appraisal well and extended well test were now scheduled to start in Autumn 2020. The company said it would then “proceed directly to drill Arreton South, followed by Arreton East in winter 202/2021.
UKOG previously said it would apply for planning permission in the first quarter of 2019 for drilling Arreton-3, followed by an application for Arreton South. At the time of writing, UKOG has not submitted any planning applications for drilling to Isle of Wight Council.
“Breach of rules”
Frack Free Isle of Wight said today
“We are concerned that the Oil & Gas Authority, which manages the licensing, is breaching its own rules.
“According to legislation a licence for an initial term for exploratory drilling is supposed to last for five years, then fall away if no well is drilled.
“This licence, PEDL331, was due to expire on 20 July 2021 and no planning permission preparation has yet been submitted for initial analysis. This extension has obviously been demanded by UKOG to give them further time to raise appropriate funding and prepare their plans so that they will not over run the expiration date.
“It would seem that the Oil & Gas Authority now have the right to overrule legislation to suit the licensee.”
Frack Free Isle of Wight said this afternoon that more than 1300 people had signed a petition against UKOG’s plans at Arreton and concerns about a threat from drilling to drinking water”
A spokesperson for the group added:
“To the east of Arreton is the region of Newchurch, with homes, farmland and the Garlic Farm under which they will presumably plan to drill multiple horizontal wells into the underlying geology.
“A plan to drill in the Arreton South Prospect could see wellsites close to Godshill and Rookley and horizontal wells drilled under the Area of Outstanding Natural Beauty, in order to achieve, in the words of Stephen Sanderson, a similar plan to Horse Hill with ‘back to back wellsites’ to maximise economic production.”
- UKOG shares closed unchanged on the day at 1.09p.