LONDON (Alliance News) - The companies involved in the Horse Hill licence in the Weald basin in southern England on Monday said they have been granted permission to flow test the oil discovery from the UK Environment Agency, as the market eagerly awaits the results to see how much oil is underneath the site near Gatwick Airport.
There are six AIM-listed companies involved in the Horse Hill licence, which caused a stir over the amount of oil that lies in the licence area and in the wider Weald basin.
Horse Hill Developments Ltd owns a 65% stake in the Horse Hill prospect and the remaining 35% of the prospect is held by Magellan Petroleum Corp.
UK Oil and Gas Investments holds a 30% stake in Horse Hill Developments, whilst Doriemus PLC, Stellar Resources PLC, Solo Oil PLC and Alba Mineral Resources PLC each hold 10% stakes in Horse Hill Developments, with Evocutis PLC holding a 2% stake and the balance is owned by Angus Energy, in which UK Oil & Gas has a 6% stake.
The companies, which all released separate statements, said they are in the final stages of operational planning to flowtest the well and said all the required equipment and the rig has been contracted.
"The company expects these flow tests to be conducted in the coming months as soon as practicable following the last remaining regulatory sign-offs from the Health and Safety Executive and Oil and Gas Authority," they said.
The flowtest will focus on testing the amount of oil-in-place in the Upper Portland sandstone reservoir and the lower down Kimmeridge limestone reservoirs.
"The test will provide the necessary reservoir engineering data to enable the company to assess the commercial viability of the Portland sandstone oil discovery, which encountered significant oil shows whilst drilling, and to further advance the "proof of concept" process for the Kimmeridge tight oil play, which has previously been shown to flow oil elsewhere in the same formations of the Weald Basin, at Balcombe some 10 miles to the south," said the companies.
The flowtest will be watched by many after the initial oil discovery at the Horse Hill-1 well caused controversy about the amount of oil it could have in place.
Back in August, UK Oil and Gas said an independent report from Schlumberger estimated the Horse Hill licence area had 10.99 billion barrels of oil in place. However, the amount of oil that could be recovered is still unknown. That is the fourth and most recent estimate to be released by the Horse Hill companies.
That latest figure covers a 55 square mile area over the PEDL137 and PEDL246 Horse Hill licenses. Of the estimate, 8.26 billion barrels is thought to lie in the Kimmeridge Clay formation, 1.71 billion barrels in the Lias formation, and 1.01 billion barrels in the Oxford Clay.
All of the previous estimates, including this latest figure, exclude the underlying Jurassic tight oil plays which lingers beneath the Kimmeridge, Lias and Oxford Clay formations.
However, the oil-in-place figures have become a topic of discussion because the flowtest needs to be carried out to confirm how much oil can be recovered, with the companies previously stating that only around 3% to 15% of the oil-in-place is ever likely to be recovered.
The oil-in-place figures have caused a stir in the past because an initial estimate made by Nutech when the oil discovery was originally made stated there was 158.0 million barrels per square mile. That figure was picked up by the media which calculated there could be as much as 100.0 billion barrels of oil in place - far more than is ever likely to be recovered.
None of the companies ever confirmed that 100.0 billion barrel figure, but former UK Oil and Gas Chairman David Lenigas was quoted in the London Evening Standard newspaper backing the 100.0 billion figure, causing the company to release a second statement that said more work needed to be completed on the project before any official figures could be calculated.
On Monday, UK Oil and Gas Chairman Stephen Sanderson said: "The consent to flow test is a major milestone for the company. The flow test's outcome will help UK Oil and Gas shape its future Portland oil development activities and materially advance its knowledge and growth in the Kimmeridge tight oil play within our licences and the wider Weald Basin."
On Monday morning, UK Oil and Gas shares were down 0.6%, whilst Solo Oil shares were down 5.9%. Doriemus shares off 4.0%, Stellar shares down 14%, Alba shares down 6.1%, and Evocutis shares down 9.1%.
By Joshua Warner; joshuawarner@alliancenews.com; @JoshAlliance
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