What DIDN’T happen at Horse Hill

What is – and is not – happening at the Horse Hill farm site only 20 miles from the southern outskirts of London is remarkable. On one hand, we have what genuinely can be described as significant – and even game changing – amount of oil. So congratulations are in order for the UKOG team for quietly, literally under Gatwick Airport’s radar, producing some actual hydrocarbons.

The Horse Hill success is even more material for the rest of the UK onshore oil and gas industry, a sector starved of good news – or indeed any news at all – from what DIDN’T happen.

First the oil, because to even a doubter like myself (at least until the Nutech and Schlumberger reports), the old adage that a drill bit is the best lie detector operates here. Horse Hill is made up of several operating companies as oil projects generally are, but the largest shareholder is UK Oil& Gas.

The news has been trickling out, but the oil hasn’t. This isn’t Spindletop, but by UK standards this is a gusher, the most productive well in years – with it’s best years most likely still to come.

This report is from Rig Zone, an oil industry site which sees wells all over the world. They sound impressed.

UK Oil & Gas Investment plc reported Monday that the Horse Hill-1 onshore discovery in southern England has shown “North Sea -like” oil flows.

The well, located near Gatwick Airport in the UK’s Weald Basin, flowed oil at a stable rate of 323 barrels per day in its latest production test, bringing the final total aggregate stable dry oil flow rate from two Kimmeridge limestones plus the overlying Portland sandstone at the well to 1,688 barrels of oil per day.

Over the 30-90 hour flow periods from each of the three tested zones, no clear indication of any reservoir pressure depletion was observed, according to UKOG. 

Pressure depletion is a key metric. Sometimes wells flow very strongly and then stop. This one seems to keep on giving. Here’s Steve Sanderson,who unlike the ebullient, (even by my standards) David Lenigas, is not one who strikes me as prone to over-excitement.

The flow test results are outstanding, demonstrating North Sea-like oil rates from an onshore well. This simple vertical well has achieved an impressive aggregate oil rate equivalent to 8.5 percent of total UK onshore daily oil production. The Portland also has greater flow potential as rates were limited by the test pump’s maximum capacity. Further significant flow rate improvements may be achieved from all zones using horizontal sidetracks during future planned operations. “These results also cause us to rethink and recalibrate many prior geological assumptions. Nutech will now reinvestigate the presence of significant natural fracturing and oil in place figures for both the Portland and Kimmeridge units given that all flow periods produced 100 percent dry oil” 

Another analysis, perhaps to be taken with a few grains of salt, from Dowgate  the brokers for Alba Oil, one of the smaller shareholders.

Given the flow rate size, high quality oil extracted, the importance of the discovery and potential of the wider Weald Basin in southern England to serve a substantial percentage of the country’s oil demand, investors should start sitting up and taking notice. One horizontal well within the Kimmeridge section at the Horse Hill site could deliver an improved flow rate, perhaps we estimate between 3 to 5 times the flow of a vertical well, which could amount to 5,000 to 8,000 bopd. From the existing platform at Horse Hill, there could be potential to operate up to 4 wells, which could boost production further up to 33,000 bopd.

Increased production volume, would require oil to be piped out rather than trucked, which could be easily achieved via an underground link to Esso’s existing Gatwick to Purfleet pipeline. Both production from this one site and the construction of an underground pipeline link would minimise the environmental footprint. An operation of this scale with production from the Kimmeridge section could lead to the oil majors running their slide rulers over the licences.

Having a pipeline nearby helps monetisation significantly, as I noted about the UK’s attractive gas infrastructure advantage. This would be exciting anywhere. In a country that imports 500,000 barrels of oil a day, it’s very exciting.Thirty four thousand barrels a day for example should be seen in a North Sea context, albeit a far cheaper one to access. Who needs a helicopter supplied drilling platform when the Gatwick Travelodge is a seven minute drive away?1

northsea

The UK planning process, once it gets unstuck, is at least open, transparent and has zero sovereign risk. I’ve had people tell me the combination of opposition, planning and geological risk makes the UK look worse than Argentina shale. Removing geological risk changes everything, but the news from Horse Hill is better still for everyone in UK onshore in political and execution risk.

THE barrier to monetisation in the UK have been the barriers to getting planning permission, built on a perception by both national and local officials, that public opposition is too high a barrier. The minimal demonstrations both on site and off at Horse Hill may mean a tipping point. The anti fracking emperor is shown to be clothes less – and clueless.

The example often cited for the perception of great opposition were the demonstrations against fracking in Balcombe against Cuadrilla back in summer 2013, when up to 2000 hit the headlines. Back then, Cuadrilla were doing no different, a vertical well that they chose because it wouldn’t need fracking. But the media were fired up by “controversial” shale gas and didn’t want to let any facts intrude the story. I said back then that this was a combination of the August silly season meeting the rare event of a warm and sunny English summer. Reporters couldn’t resist heading to Balcombe, taking a few pictures of young female protestors with flowers in their hair and heading to sit in the sun outside the pub to file the story.

The UK’s Channel Four News for example interviewed me for half an hour at the London studio, but used about ten seconds.  They did allow a protestor dressed as a goat a two minute spot to sing a song. Yet barely a month later, the crowd of both demonstrators and journalists had moved on.

At Horse Hill,  the local community seems to care less. There was a meeting of 50 (!) at the Hookwood Memorial Hall recently, led by Vanessa Vine and Charles Metcalfe of the Balcombe movement which resulted in fracturing the village not any rocks.

Sixty residents in Balcombe, West Sussex, have put their name to a letter in support of fracking and criticised the anti-fracking campaigners who continue to mount daily protests in a camp on the outskirts of Balcombe.

The villagers believe that despite the “relentless propaganda”, exploratory drilling or properly-regulated exploitation will not “unduly damage” the environment.

Their letter states: “Having regard to the outlook for energy prices, energy security, and importance to the national economy, we believe that we, in common with other communities, should accept and facilitate this ‘new’ technology.”

Anti-fracking campaigners who have disrupted the exploratory oil drilling operation by energy firm Cuadrilla were criticised.

“We deplore the abuse suffered by employees of the drilling company, and the police, extended trespass, and the establishment of a semi-permanent ‘protest camp’ on hitherto beautiful road verges, actions which add up to an abuse of the undoubted right to peaceful protest,” the villagers said.

Back to this year. The only report I could find about the protest came from protestors themselves:

Rather, it is you, the community, that holds the true power – the power that will ultimately decide if Surrey is eventually to be turned into an oilfield like Texas, or if it is to stay green and pleasant, as it surely will if you come together to take a stand against the extreme energy agenda that is currently bearing down on you.”

The Hookwood Memorial Hall (red pin)  is only a couple of miles from the site, but since it’s already situated in-between a Tesco supermarket and the Travelodge 300 meters from the perimeter fence at Gatwick Airport, it seems a strange place to protect.

horsehill

The green and pleasant land, inhabited by rich suburbanites myth was encouraged not only by demonstrators but by some in the media. Horse Hill is only 10K north of Balcombe. Even more importantly it’s only 20 odd miles from the southern outskirts of London. Yet neither locals or the media could be bothered.

This time around, it’s cloudy and miserable and an actual discovery of substantial amounts of oil instead of exploring for it as at Balcombe, changes things. What’s most important is that there has been so little media interest that the protestors have been complaining of a media blackout.

The press interest this time around has been much far more subdued and even positive from the local press. The rest of the media and the UK are simply not bothered either way.

The clear lesson from Horse Hill is that Peak Protest has gone the way of Peak Oil. Hopefully this will not escape the notice of either politicians or investors. Public opposition as a reason not to invest in UK oil is no longer valid.  

Share Talk would like to thank Nick for his article – you can read more of Nick’s work here.

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