Gatwick oil discovery estimates wildly optimistic, says GlobalData analyst

The recent announcement by exploration firm UK Oil & Gas Investments (UKOG) that there could be up to 100 billion barrels of oil onshore beneath the South of England area, following its discovery at a well near Gatwick airport, is wildly optimistic, says an analyst with research and consulting firm GlobalData.

Matthew Jurecky, GlobalData’s head of oil & gas research and consulting, states that the high estimate assumes consistent geological characteristics across the identified formation with limited reservoir compartmentalization, which one well test cannot determine.

UKOG believes the area could hold 158 million barrels per square mile, but the company announced an in-place estimate of just 150 million barrels. GlobalData states that, if there is an assumed recovery factor of 10%, this would more reasonably equate to approximately 15 million barrels recoverable, around the same amount produced by only one well in the North Sea.

“Estimates for 100 billion barrels of oil are very misleading,” Jurecky says. “Rarely are formations that homologous where a single discovery can be extrapolated over a very wide area. For example, the Bakken shale in the US is more homologous than other rocks over a larger area, with specific characteristics that make it particularly productive, which has led to an oil boom. There are examples of various other shale plays rich in hydrocarbons across the US that have failed to commercialize due to lacking a key feature, or issues such as their clay content complicating production. The Bakken stretches out across a wide part of Canada and the US, but is really only produced in a core area of Montana and North Dakota. The play pinches out and is too thin, or lacks certain characteristics across the wider formation that are present in producing areas.”

The analyst adds that the size of the Gatwick find will depend on how homologous and contiguous the reservoir is.

“Conventional discoveries are more spotty, making it less likely that the well results will be repeatable over a large area,” Jurecky adds. “Even if they are, consider that the Bakken development area spans over 200,000 square miles, and, with the UK discovery on the outskirts of London, the development area would be severely restricted.

“This does not even begin to consider above-ground factors,” the analyst concludes, “such as high development costs and public opposition to drilling activities.”

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