What’s the story?
Huge oil reserves that could yield the equivalent of 100 billion barrels have been found at a site near Gatwick Airport.
The discovery has been made by an exploration firm licensed under the name Horse Hill, 30 per cent of which is owned by UK Oil and Gas investments, or UKOG, whose share price got an impressive boost from the annoucement.
How much oil has been discovered?
At first look, experts say 158 million barrels of oil per square mile, or up to 100 billion barrels, but only a fraction of that – between 3 per cent and 15 per cent – is likely to be recovered, UKOG have said.
The North Sea has yielded around 45 billion barrels of oil in 40 years of exploration - but productivity there is declining, as shown by the chart below. UKOG thinks Horse Hill can fill the gap. It said the site could meet between 10 per cent and 30 per cent of UK demand for oil by 2030.
Analysts have downplayed the find, however. Ken Odeluga, a senior market analyst at City Index, said that this is a significant find, but not a major one. "The overall oil market and UK financial market impact will be zero," Odeluga said.
So we’re not suddenly going to get cheaper petrol?
No. The price of petrol is pegged to the global price of oil – which has slumped to from over $100 per barrel last year to between $50 and $60 per barrel.
The biggest global oil producers are pumping through the crisis - Saudi Arabia, for example, has said it will continue producing over 10 million barrels a day. That could affect the price of commodities and services, but this latest discovery won’t.
Where exactly is the site?
The Horse Hill licences cover 55 square miles of the Weald Basin in southern England – an area that has long been known to contain shale oil. A government report about the Weald Basin last year estimated the area could hold shale oil resources in the range of 2.2-8.5 billion barrels of oil.
Will this affect Gatwick’s expansion plans?
The area licensed to Horse Hill is between two and three miles north of Gatwick Airport. Plans to build a second runway at Gatwick are to the south of the airport’s existing runway. So the two shouldn’t interfere with one another.
Should we be worried about fracking?
UKOG has said Horse Hill is naturally fractured and that oil reservoirs could potentially be produced using "conventional horizontal drilling and completion techniques".
Even without fracking, activists have said that the UK should be moving away from reliance on fossil fuels. "We already have more than enough coal, oil, and gas reserves to fry the planet," said Greenpeace chief scientist Doug Parr. "It's time we uncoupled our economy from the dangerous roller-coaster of fossil fuels and invested in the clean technologies that can provide safe and cheap energy for decades to come."