UK Oil & Gas (LON:UKOG) has ‘discovered’ some 219mln barrels of oil apparently overlooked in the past by British Gas on the Isle of Wight.
As one of the larger stakeholders in the Horse Hill discovery (aka the ‘Gatwick Gusher’), UKOG is no stranger to bold new oil claims. That project, located near the London airport, made headlines last year amid truly huge resource estimates (expressed by third parties in ‘billions of barrels’).
This morning, meanwhile, UKOG told investors that a new petrophysical analysis of the Arreton prospect, on the Isle of Wight, which was drilled by British Gas in 1974, has shown it to be an undeveloped discovery.
Across a number of reservoir intervals – called the Purbeck, Portland and the Inferior Oolite limestone - the project is now estimated to host some 219mln barrels of oil-in-place, with around 10.2mln currently deemed ‘recoverable’.
UKOG added that there’s further oil potential in the area, which also includes a landward extension of the offshore M prospect as well as other undrilled prospects within tight limestones and shales that are similar to those found at Horse Hill.
Stephen Sanderson, UKOG chief executive, highlighted that Arreton more than triples the company’s net recoverable resource base for conventional oil.
“The PEDL 331 Licence is thus a highly significant and material addition to our portfolio and will be a key part of the company's growth plans,” he said.
“We are well advanced in our plans to drill a vertical pilot and horizontal appraisal of the Arreton-2 oil discovery. We are confident that, since independently derived drilling costs are relatively modest, the economic viability of the project is robust even at reduced oil prices.”
He added that the plan is to pilot new and innovative limestone reservoir stimulation techniques which may maximise flow rates and recoverability without the use of “massive hydraulic fracturing.”
The new assessment of Arreton was conducted by consultant Xodus Group.
Arreton is located within PEDL 331, which was offered to UKOG and its partners Solo Oil (LON:SOLO) and Angus Energy in December 2015. The Arreton-2 well was drilled in 1974 by British Gas and at that time it unexpectedly encountered oil shows but subsequent well tests were unsuccessful.
At present, the new partners are working on documentation following December’s licensing round to finalise the regulatory arrangements, and the licence start date is expected in April.
Solo Oil chairman Neil Ritson, in a statement, said: "We are delighted with the technical progress being made on the recently offered licence PEDL 331 and look forward to further plans as they emerge from the licence group.
“The Arreton-2 discovery, Arreton Main, clearly contains significant potential for producible oil and there are similar undrilled prospects within the licence."
UKOG intends to accelerate discussions with the local planning authority on the Isle of Wight and plans to submit applications for a planned appraisal programme which will aim to confirm the new assessment of Arreton.
The company says it has already completed studies and cost estimates for potentially re-drilling the historic well, and it added that there’s also plans to conduct 2D seismic work too though this would come after a well.