LONDON (Alliance News) - UK Oil & Gas Investments PLC Wednesday sought to cool widespread speculation about the potential size of a new oil discovery in Southeast England, reiterating that it will need to undertake more exploration and testing before the potential size of its own license can be confirmed, let alone the wider basin in which it sits.
The company had last week said it made a significant oil discovery at the Horse Hill 1 well in the Weald basin near Gatwick Airport in Southeast England, leading to widespread speculation about the amount of oil that could be recovered from the wider basin in coming years, as well as concerns about the environmental impact of the onshore discovery.
The discovery comes just as the recent decline in the oil price has raised new fears about production in the North Sea, which is becoming increasingly expensive as reserves dwindle and become more costly to retrieve.
In its statement Wednesday, UK Oil & Gas Investments said it wanted to repeat and clarify a number of points that it made in last week's statement in response to recent media reports.
Excitement about the discovery in the Weald Basin had last week prompted widespread media speculation about the potential size of the oil lying under this part of Southeast England. Sky News and the BBC had reported that the oil in place could be around 100.0 billion barrels of oil, which is more than double the 45 billion barrels of oil that has been produced in the North Sea in the last 40 years. However, the amount of oil that will be recovered is expected to be significantly less.
UK Oil & Gas Investments reiterated that a report from US-based Nutech Ltd had estimated that the Horse Hill-1 well has a total oil in place of 158 million barrels per square mile. It noted that the upgrade related to the Kimmeridge, Oxford and Lias sections of Horse Hill and did not relate to the previously reported Upper Portland Sandstone oil discovery.
"The oil in place hydrocarbon volumes estimated should not be considered as either contingent or prospective resources or reserves," UK Oil & Gas said.
"The Horse Hill licences cover 55 square miles of the Weald Basin in southern England in which the company has a 20.358% interest. It is estimated that the relevant Jurassic section of the Weald Basin is approximately 1,100 square miles. The company has not undertaken work outside of its licence areas sufficient to comment on the possible oil in place in either the approximate 1,100 square miles or the whole of the Weald Basin," it added.
It said it will need to do more appraisal drilling, well testing and assessment of recovery factors in order to quantify the net resources in relation to its own licence areas and to prove its commerciality.
The Horse Hill-1 well is located within onshore exploration license PEDL137, on the northern side of the Weald Basin near Gatwick Airport. A special purpose vehicle, Horse Hill Developments Ltd, owns a 65% stake in the prospect and the remaining 35% of the prospect is held by Magellan Petroleum Corp.
UK Oil & 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.
On Monday, UK Oil and Gas Investments took full ownership of the PEDL126 license in the Weald basin by buying the 40% stake it didn't already own. This license lies further to the south of the PEDL137 license, near Waterlooville in Hampshire.
The company's shares, which have more than doubled since last week's announcement, were down 3.3% at 2.20 pence early Wednesday.
Doriemus shares were down 5.6% at 0.085p, Stellar Resources was down 7.4% to 0.417p, Alba Mineral shares were flat at 0.500p, Solo Oil was down 1.7% at 0.575p and Evocutis was down 12.6% at 0.205p.
By Steve McGrath; stevemcgrath@alliancenews.com; @stevemcgrath1
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