Future Kimmeridge Limestone oil production projects over the UK’s Weald Basin could generate between approximately 1,000 to 5,600 jobs in the UK per year on average during their lifetime, according to a report from advisory services firm EY, which was commissioned by UK Oil & Gas Investments plc.
The report predicts that the gross value added to the UK economy as a result of the ventures could range from $10 billion (GBP 7.1 billion) to $74.6 billion (GBP 52.6 billion) and stated that future peak oil production from these projects could provide around 4 to 27 percent of the UK’s 2014 daily oil demand. Under a ‘low’ scenario, the report indicates that total production from the lifetime of the projects would be around 140 million barrels. This figure would rise to 560 million barrels in a ‘mid’ scenario, and 1.1 billion barrels in a ‘high’ scenario.
Peak oil production in the mid and high scenarios is around 170,000 and 330,000 barrels per day, according to the report, which states that its production scenarios are “conservative” and highlighted that the results of recent extended flow testing of Kimmeridge Limestone Oil were “far above expectations”.
Commenting on the potential benefits of Kimmeridge Limestone Oil on the UK economy, the EY report states:
“The development of Kimmeridge Limestone Oil in the Weald Basin, assuming it can be extracted from a development site at the volumes projected by UKOG, has the potential to generate significant economic value to the UK economy, partially off-set the decline in oil production from UK fields, support employment, and generate significant tax benefits to the exchequer.
“These benefits will be maximized via the development of a UK-based supply chain, and through a series of targeted policies and initiatives to appropriately mitigate potential barriers to development.
“Conceptual studies and oil in place estimates previously conducted suggest a significant opportunity for the UK to secure a proportion of its energy from the Weald Basin.”
UKOG’s Executive Chairman, Stephen Sanderson, commented in a company statement:
“This report confirms UKOG’s view that the development of Kimmeridge Limestone oil in the Weald Basin can make a very significant contribution to the economy, employment and energy security of the UK.
“The report’s conclusions are given credence by the recent results of the highly successful Kimmeridge Limestone flow tests at the Horse Hill-1 oil discovery. The tests demonstrate that significant volumes of high-quality light oil exists within the Kimmeridge Limestones and can flow naturally to surface at commercial rates.
“The unexpectedly high aggregate flow rate of over 1,365 barrels per day from Horse Hill’s two Kimmeridge Limestones far exceeds the study’s modelled peak flow rate of 400 bopd per horizontal well. It is, therefore, possible that the overall economic impact of Kimmeridge Limestone oil could be significantly higher than this initial report describes.”
EY’s analysis builds on the successful oil flow tests from the Kimmeridge Limestones at the Horse Hill-1 oil discovery and utilized the company’s internal assumptions on production rates for a multiple horizontal well production site, together with Xodus Group’s conceptual multi-well site development study and Nutech’s calculated oil in the ground and likely oil recovery factors. The assumptions on individual production well performance were made prior to the HH-1 flow test results, which were first announced Feb. 16.
The report is solely in relation to the potential extraction of oil from the two main Kimmeridge Limestones over the entire Weald Basin and is not an assessment of the company’s own 11 individual license interests in the Weald.
In a separate statement released Monday, UKOG announced that it has acquired all of Angus Energy Holdings UK Limited’s remaining 7.8 percent interest in onshore Weald Basin licenses PEDL137 and PEDL246.
As a result of the deal, which cost UKOG $2.5 million (GBP 1.8 million), the company has increased its net working interest in the licenses from 19.968 percent to 27.3% percent. The licenses, covering an area of 55 square miles, contain the new Horse Hill-1 Portland sandstone and Kimmeridge Limestone oil discoveries north of Gatwick Airport.
UKOG’s Executive Chairman, Stephen Sanderson, described the transaction as an “important and entirely logical step” for the energy firm in a company release.
“It provides us with a far more material interest in the exciting HH-1 Portland and Kimmeridge limestone oil discovery, and importantly, is part of our ongoing strategy to consolidate and expand our license position in the new and potentially significant Kimmeridge Limestone oil province,” said Sanderson in a UKOG statement.
“With our increased interest in Horse Hill we will be looking hard at translating the commercial flow rates seen from the Kimmeridge and Portland flow tests at Horse Hill-1 towards commercial production. To this end, further long-term production tests of all zones are now planned by the Horse Hill License holders within the next year, subject to regulatory approvals. These tests are planned to be followed, by a number of horizontal Kimmeridge Limestone side-track wells, 3D seismic and a new stand-alone Portland appraisal/development well,” he added.