UK Oil and Gas Investments Plc (LON:UKOG) Chief Executive Officer Stephen Sanderson caught up with DirectorsTalk for an exclusive interview to discuss a study from leading experts Nutech, explains the numbers involved and the discussions with the UK government
Q1: You released the findings of a commission study from the leading specialist Nutech, how confident are you in the study?
A1: Extremely confident. Nutech are arguably the world’s leading expert in analysing these types of oil deposits, they’ve looked at every equivalent type of producing oil deposit in the United States and they advise many governments including the Netherlands, Poland, Mexico and lots of super major oil companies such as BP, Chevron and Conoco. It’s an extremely rigorous analysis, I should also point out that Nutech are in fact one of only four companies approved by the UK government to handle the release and handling of UK-owned, government-owned well database. It’s also worth pointing out that this study basically looks at all 86 wells over the Weald area and I think we should also realise that this is a study, a report, one of five, two of which were previously done by Nutech, two were done by Schlumberger and essentially be Schlumberger verified Nutech’s numbers that were calculated over the 55 square miles of the Horse Hill licences. So the distinct answer coming back to you is that I’m extremely confident in the technical credentials of Nutech and the methodology that they use which is proven in the United States in equivalent producing oil and gas plays of this type.
Q2: Can you tell me what the numbers actually mean?
A2: In a short term of view, there is a significant volume of oil in the Weald. I think you have to understand that all this started with the Horse Hill well that we drilled last year and really was a game-changer, if you like, in our understanding of the weald’s oil potential. Since then, we’ve actually believed that there is significant oil underlying our licences and actually over the whole of the Weald. What we’ve put out today, those numbers for the whole of the Weald area that we looked at which is about 1200 square miles, was 124 billion barrels, this is oil in the ground and I’ll come back to that in a minute. So it’s 124 billion barrels over 1200 square miles, out of that 1200 square miles, we have 8 licences that fall in the area of study and that covers about 151 square miles and out of that 151 square miles, 16 billion of that 124 actually lies within those licences so UKOG has a slice of a very large pie, if you like. I should also point out that the 16 billion on our licences is gross, our net commercial economic interest is about 4 billion barrels. So coming back to your actual question of what does it mean, well of course it means there’s an awful lot of oil in rocks underlying the Weald and in the Horse Hill area, there’s about a 700 foot thick section of rock that actually contains the oil. In the Horse Hill licence area, the 55 square miles, the oil is contained in about 7 cubic miles of rock, and that’s a lot of rock, so basically what we’re looking at, as a rule of thumb, is about 1 billion barrels of oil in the rock per square mile. So when you look over the whole of the Weald, we’re looking at 100 or more cubic miles of rock which contains oil so that’s a lot of oil, basically. I have to say that this is oil in the ground, it’s what we call oil in place in the industry which means that’s the oil before any is extracted or produced by any wells so what we look at is that when we move to try and recover this, clearly we recovered a fairly small percentage and I think you’ll see on the release that we mentioned or Nutech say that producing plays in the United States, which they believe are sort of lookalikes or analogues to the one we have, have about 3-8% recovery so our target for recovery is sort of about 5% and that’s a technical recovery. I should point out of course that recovery is always subject to technical conditions but also there’s economic overprints such as the price of oil and also political and other aspects as well.
Q3: So what are the next steps?
A3: This is oil in the ground, so what we’re interested in is getting the oil out of the ground and actually producing it and selling it. The company’s focus is clearly on moving forward and trying to establish ‘can we extract oil in commercial volumes and flow rates from these rocks’ so the next major step is of course testing the Horse Hill well which we expect to be done in the next few months and then we’re sufficiently encouraged by this report and the volumes that are contained, not only in our Horse Hill licences but in our other licences as well, that we’re now in the process of participating in another couple of wells, a couple of exploration wells, over the next 18 months.
Q4: You also mentioned that one of the factors is the government’s involvement, are you talking to the government about this?
A4: Yes, we’ve engaged with appropriate persons and departments in government. We’ve been keeping them abreast of all our thoughts, ideas and our announcements on our licences and the Weald as a whole. Personally speaking and as a company, I’m very encouraged to see and hear what the government has said and proposed about changes to well permitting and planning processes in order to speed up the oil and gas exploration development process in the onshore in the United Kingdom, it was proceeding at a very slow pace. I hope that in the future, or in the near future, that the government will lend its further support to helping UK Oil and Gas Investments Plc and the industry try and develop what is potentially a very significant resource for the UK and frankly this whole announcement I think is really good news for the United Kingdom, it’s certainly good for the government and I think it’s certainly good for the taxpayer.
