By Simon Watkins, Financial Mail on Sunday
Fracking could be used to exploit vast oil reserves discovered under South East England, despite pledges by the company behind the find that it will not use the controversial technique.
David Lenigas, chairman of UK Oil & Gas Investments, said he had no intention of fracking in the region. But the company, which unveiled the find last week, has a licence for only a fraction of the area and other oil groups could dramatically increase output by using the system.
In an interview with The Mail on Sunday, Lenigas repeated his pledge that he had 'no intention' of using fracking, but said research indicated that far greater quantities of oil could be extracted with the technique.
Keep out: David Lenigas, chairman of UK Oil & Gas Investments, said he had no intention of fracking in the region
'We reckon five to 15 per cent can be got out of the oil in place,' he said, 'but we have seen numbers with technology and going to fracking you can get up to 30 to 40 per cent recovery out of some of these things. But I am not interested in doing that.'
Lenigas admits that the job of extracting oil, if his company's analysis proves accurate, will overwhelmingly be a job for larger oil groups. City sources even speculate that a takeover could now come for the key site explored by UK Oil & Gas.
The Horse Hill site near Gatwick Airport is owned through a consortium in which UK Oil & Gas is the biggest member, but could now prove attractive to a larger oil group more willing to use fracking.
The technique uses high pressure injections of chemicals and water to split rock underground and release oil and gas.
UK Oil & Gas estimates there could be 158 million barrels of oil per square mile under its site. Across the Weald basin, which covers much of East and West Sussex and Surrey, the bonanza could hit 100 billion barrels. Even with low recovery rates, the find is the biggest since the North Sea.
Using fracking to double the yield would make the area far more attractive to the oil giants. News that the find could be far higher than previously suspected prompted a surge in the share price of smaller oil companies exploring in Britain and UK Oil & Gas saw its stock leap at one point by more than 330 per cent.
Discovery: TV crews surround the site in Horse Hill, Surrey, earlier in the week
The news also prompted interest from the Government. A source close to the oil group said a call was made to Lenigas within hours. The Department of Energy & Climate Change confirmed there had been contact but described it as 'routine'.
A Government-commissioned report has argued that risks to the environment and public health from fracking are 'low if operations are properly run and regulated', but environmental campaigners fear the risks are too great. Greenpeace reacted with alarm to last week's reports and claimed fracking would inevitably be part of the exploitation of the region's oil and make it an Election issue.
The Government has firmly backed fracking as an option, but has also encouraged the oil industry to ensure local communities benefit from any economic boost.
The UK oil and gas industry has agreed to pay £100,000 in 'community benefits' where fracking is used to release gas from shale rock – a typical technique in America.
As yet, however, there is no equivalent system for other rock formations. Shares in UK Oil & Gas fell back from their early spike but still ended the week up 136 per cent, valuing the group at £37 million.