An inquiry into plans to explore for gas in Surrey heard today that the best place to drill would be from a new sustainable garden village planned for Dunsfold Aerodrome.

UK Oil & Gas plc, the company behind the project, was giving evidence at its appeal against refusal of planning permission by Surrey County Council.

The company’s chief executive, Stephen Sanderson, said the selected drill site, at Loxley, was “by no means ideal”.

He told the online hearing the site was at least 800m from the target location, above what is known as the gas deposit’s crestal area.

Mr Sanderson said:

“The optimum site to best fulfil the Appellant’s technical and commercial objectives lies approximately 1km to the south of the Loxley site directly within the centre of the Deposit’s Crestal Area.

“This site lies within the Dunsfold Aerodrome housing development under which a significant proportion the Deposit’s Crestal Area lies. It is therefore unavailable.”

Mr Sanderson said the crestal area, estimated to contain 78% of the deposit’s total gas volume, was to the south, south west and south east of the proposed Loxley site.

“Near the limit”

For the project to be viable, the company needed to access a section of the crestal area with a depth of att least 100ft of gas, the inquiry heard.

This zone could be reached from the Loxley site, he said, but only with a well near its technical limits, Mr Sanderson said.

He said the well would need to be inclined up to 60 degrees:

“800m deviation at 1,000m [depth] is not an easy well to drill.”

He described it “at the limit necessary required to reliably capture core samples with acceptable risks”.

The inquiry heard that UKOG had considered more than 20 other sites. Mr Sanderson said none were more suitable than Loxley.

Some were east of the A281 but Mr Sanderson said they needed “far more substantial” horizontal deviated wells, of about 2.5-3km, three times that of the Loxley site. These sites would be commercially unfeasible, he said, because drilling would be longer, more expensive and riskier and need larger rigs.

Economic benefits

Mr Sanderson also gave evidence about the economic benefits of the Loxley site. He said:

“I find the proposed development will contribute significantly to the local economy, help the UK meet its commitment to net zero, provide security of energy supply, create direct and indirect jobs and pay revenue to the UK government.

“These are sustainable economic and social benefits of local and national importance and in helping to secure them, the proposed development represents essential minerals development in the general public interest.”

He said at the base case (the lowest estimated volume of gas), Loxley’s annual production  would “provide the power equivalent of Guildford or Waverley borough’s entire annual domestic and industrial electricity demand or their individual total gas consumption”.

Jenny Wigley QC, for Surrey County Council, asked Mr Sanderson:

“You do understand that this [application] is just exploration? Exploration will not produce any income”.

Mr Sanderson replied:

“It will be an expense but there is no sense in doing exploration if you don’t plan to take it forward to exploitation”.

Ms Wigley pointed to government minerals planning guidance which said decision-makers should not take account of hypothetical future activities for which consent has not yet been sought.

She said:

“there is a risk that the gas is not there or not viable. There is also the risk that it is not environmentally acceptable to have a production well in this location.”

Mr Sanderson said the site had been granted an environment permit.

“That is not planning permission”, Ms Wigley said.

She said UKOG’s team had relied on the temporary nature of exploration to argue that the site was environmentally acceptable.

Mr Sanderson agreed that production would be longer than exploration.

He said the cost of exploratory drilling was likely to be about £7m. It would use specialist equipment and he conceded that there had been no estimate at this stage of the value of local services that would be used at exploration.

Mr Sanderson said UKOG planned to turn Loxley gas into hydrogen. It could be sent to a BP site on Teesside or to one planned for Liverpool Bay.

He said the site was “a real opportunity to help meet net zero [carbon emissions.”

Loxley gas would generate 79% less global greenhouse gas emissions than equivalent imported liquified natural gas, he said. This represented a reduction in CO2 emissions of 600,000-1,000,000 tonnes, he said.

Kirsty Clough, of the Weald Action Group, put it to Mr Sanderson that these estimates were based on the pre-combustion emissions. If you look at the full lifecycle, the saving becomes much less significant, she said.

Mr Sanderson replied:

“If you import gas you have to do it in the knowledge that the pre-combustion emissions are greater so the lifecycle is greater.”

Ms Clough said the proportion of gas supplied to the UK by imports was likely to increase between now and 2050. But the actual volume of imported gas may go down as demand fell.

Mr Sanderson said:

“We will still have a significant gas demand in 2050. If that can’t be met by interconnectors, this must be met by LNG. There is no alternative.”

Ms Clough suggested that UKOG’s estimated carbon savings depended on volume calculations.

The inquiry heard that the company estimated production of up to 9-12 billion cubic feet of gas from Loxley.

Ms Clough asked whether this was based on any new data. Two years ago, she said the consultancy Xodus had said more data was needed to “properly estimate the in-place volumes”.

Mr Sanderson said there was only legacy data from wells drilled in the 1980s. But UKOG had re-evaluated the original cores, used new techniques that had previously not been available and looked again at seismic data from the 1970s and 1980s.

Asked if the new interpretation of the data had been published, he said

“We are not obliged to publish. It is commercially-sensitive”.

Funding

Cross-examined by Patrick Arthur, for Waverley Borough Council, Mr Sanderson was asked how the exploration project would be funded.

“From cash in the company, or raised, or income, he said.

Mr Arthur asked how he would describe the company’s balance sheet.

“We made a loss”, Mr Sanderson said.

How much, asked Mr Arthur.

I can’t remember, Mr Sanderson said.

The latest UKOG annual accounts recorded a loss of £1.63m for the 12 months to September 2020.

The inquiry heard that the share price had once been more than £3. Mr Arthurs asked what the price was now.

“0.2p”, Mr Sanderson said.

At the close of trading today, UKOG shares were up 1% at 0.14p.

Mr Sanderson said “You are picking a few points without context”.

David Elvin QC, for UKOG, complained about Mr Arthur’s line of questioning.

More traffic evidence

Surrey County Council’s traffic witness, Graham Foulkes, questioned UKOG’s proposed use of traffic signals, warning signs and banksmen near the Loxley site, only when heavy goods vehicles wre visiting. He said:

“It is a little bit of a mess for the ordinary motorist.

“They will see different situations on different days. The interruption is too disruptive and too sporadic for there to be any comfortable drive through”.

He said he was concerned that issues raised in the safety audit had not been totally resolved and he warned that drivers may jump red lights at the junction between Dunsfold Road and High Loxley Road.

Mr Foulkes estimated that Dunsfold Road had an injury accident rate four times higher than the national average. There would be a small increase in traffic flow generated by the Loxley site, he said, but it would result in traffic unsuited to Dunsfold Road and High Loxley Road.

Mr Elvin criticised Mr Foulkes for not discussing his concerns with Surrey County Council highways officers. They had not objected to planning permission, the inquiry heard. Mr Elvin also questioned the methodology of Mr Foulkes’ comparison of Dunsfold Road’s safety record with the national average.

• The inquiry heard that highway works proposed by UKOG would not need to use common land. The issue had been raised at hearings last week.

The inquiry resumes at 9.30am on Wednesday 4 August 2021 with UKOG’s evidence on its proposed operations