PROSPECTORS used to taste the stuff to determine its quality, and the oil tapped on February 16th in the Surrey countryside sounded delicious: light, sweet and less than 1% water. UK Oil & Gas (UKOG), the firm operating the exploratory well at Horse Hill, just north of Gatwick airport, says its first two tankers-worth are already being refined and will be in petrol stations within a fortnight.
The company announced that it had struck oil a year ago, to some scepticism. But its test this week extracted nearly 500 barrels of good-quality crude from a depth of 900m (3,000 feet) in the Lower Kimmeridge limestone zone. The oil flowed to the surface under its own pressure, known in the parlance as a gusher. This is good news for UKOG, as it ought to mean fewer costly, dirty mechanical interventions and no need for unpopular “fracking” (which is legal in Britain only below 1,000m anyway). That, of course, is unlikely to shift the dogged environmental campaigners camped out at the site, who would rather the oil stayed in the ground.
Still, it is one thing to know oil is there and quite another to extract it profitably. As only part of a reserve is usually recovered (the permeability of rock precluding extraction of the rest), prospectors need to be sure there is enough to make the effort pay. And the oil price has been tumbling: Brent crude now trades at just over $30 a barrel, perilously close to the $18-25 range that UKOG says is needed to break even in Britain’s onshore industry.
UKOG is encouraged by analyses by Nutech and Schlumberger, a pair of energy-research firms, that suggest Horse Hill could contain between 9 billion and 11 billion barrels of oil. With the right investment the Weald Basin, the surrounding area to which the company has access, could produce 10-15% of Britain’s daily oil demand in a decade or so, says Stephen Sanderson, UKOG’s boss.
That is a somewhat lower estimate than the company gave last year, and others are more cautious still. “So far, it’s not so much the Gatwick gusher—more the Dorking dribbler,” says Richard Selley, a geologist at Imperial College London. It is notoriously difficult to predict when the natural fractures through which oil flows will close, he warns. Tests lasting many months are required. Mr Sanderson complains that getting permission to drill takes two years in Britain, compared with two months in Texas.
Still, oilmen point to the Wytch Farm field on Dorset’s Jurassic coast as an example of environmentally responsible and profitable extraction. Sited in protected countryside and surrounded by woodland, it is barely known to locals. UKOG hopes that its sites across the Weald Basin will be similarly invisible—and profitable.
This article was commissioned by The Economist