Tiny UK explorer makes big claim of oilfields near Gatwick

A tiny UK oil explorer has claimed there could be up to 100bn barrels of oil beneath the home counties of southeast England, after drilling at a well near Gatwick airport.

Shares in UK Oil & Gas Investments (UKOG), an Aim-traded oil exploration company, leapt 220 per cent on Thursday after it said that the Weald Basin held 158m barrels of oil per square mile, far outreaching previous government-funded estimates.

UKOG claimed to have discovered a "world-class potential resource" in a 650ft section some 3,000 to 5,000ft below the ground after drilling into the Weald Basin at Horse Hill in Surrey. However, industry analysts were sceptical about the company's claims and how much oil could be economically recovered from the area.

David Lenigas, chairman of UKOG, extrapolated that the whole basin could contain "multiple billion barrels" and was "turning into a potentially strategic asset for the UK".

"The key thing about this discovery is about what Britain and the British government want to do about this strategic asset," he said in an interview with BBC News. "All we've done is find it."

His enthusiasm contrasted with a report from the British Geological Survey last May that estimated there was 4.4bn barrels of shale oil in the Weald Basin, but warned it was "not known" how much could be commercially extracted, as it was believed to be present in the rocks.

UKOG said that new oil extraction technology had "comprehensively changed the understanding of the area's potential oil resources".

Mr Lenigas admitted it was impossible to say how much of the oil could potentially be recovered until flow testing of the 30m-deep well occurred, but said approvals were "in process" for this to happen this year.

Shares in UK Oil & Gas more than doubled to 3.58p in morning trading in London on Thursday. They closed up 169 per cent to 2.98p. But industry analysts questioned the claims being made by the company, which has a market capitalisation of just over £48m and is the latest of several small oil explorers that Mr Lenigas has been involved with.

"You would need to have a lot of wells," said Malcolm Graham-Wood, founding partner of Hydrocarbon Capital, an independent oil advisory company. "That is easy in Texas or Louisiana where you can put nodding donkeys all over the place, but it is less easy when you're next to Gatwick airport."

"I would not, as of yet, get overly excited," he added. "This is at a very early stage. The recovery factor they are claiming is between 3 and 15 per cent, but the physical point of getting oil out of this kind of limestone is far from being proven."

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But Mr Lenigas argued to the BBC that other onshore wells had been running in the area for decades without community protests. "This is not going to be a US-style operation," he said, claiming that infrastructure to extract the oil would be "unobtrusive".

"You are looking at six weeks of minor disruption, and 20-30 years of economic gain," he said.

UKOG's licence covers 55 square miles on the Surrey-Sussex borders, in which the company has a 20 per cent share, but it extrapolated its findings to estimate that the whole of the basin could contain up to 100bn barrels of oil - more than four times estimates of the UK's offshore oil reserves.

The Geological Survey report on the area highlighted some of the barriers to recovering oil from the area, saying. "Non-geological factors such as oil price, operating costs and the scale of development agreed by the local planning system will affect the amount of oil produced."

This article has been corrected to clarify that the resource identified by UK Oil & Gas Investments was in a 650ft section some 3,000ft to 5,000ft below the ground.

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