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Gatwick oil discovery: a new black gold rush?

The UK Oil & Gas Investments site in the Weald Basin, West Sussex Photo: PA Wire

A goldrush (of sorts) began in Kent in 1890. While digging for an early (but abandoned) channel tunnel, coal was discovered. Dozens of boreholes were sunk across the county, a railway was constructed to carry the expected riches and anticipation was high. Yet apart from a handful of small mines, the next century was one of disappointment as the coal proved scarce and difficult to extract. The last mine closed in 1989.

The East Kent Coalfields are on the very eastern edge of the Weald Basin which today has promised new wealth of oil – but will it meet the same sorry end as the mines?

UK Oil and Gas, a small speculating company, announced this morning that surveys it commissioned from an independent specialist suggest there is a vast reservoir of oil under Horse Hill, an area just north of Gatwick Airport. The boss of UKOG, David Lenigas, told ITV News there could be as much as 80 billion barrels across the Weald – which spans Kent, Sussex and Surrey. If true, this is almost four times the estimates of Britain’s offshore reserves.

Mr Lenigas’ company has 20 per cent share of a license to extract oil from 55 square miles in the area and shares in UKOG rocketed more than 350 per cent in the first hour and a half of trade this morning. There had been a lot of anticipation among small investors who follow the stock, teased a little by hints over the past few weeks that there was big news coming. Some people have made an awful lot of money. “If life is like a box of chocolates then investing in UKOG and [Horse Hill] is like finding Wonkers [sic] golden ticket” tweeted one.

But for those who have bought in to the stock, what chance of making more money? The survey commissioned by UKOG is ten times more optimistic than the British Geological Survey last year. While UKOG acknowledges only 3-15 per cent of the oil can be extracted from the ground, even this is questioned by analysts. The Weald is, in parts, amongst the most attractive countryside in England and the ‘nodding donkey’ pumps familiar from dusty Texas plains would find a hostile reception.

Shares in the company have sunk back from the peaks of the morning but closed the day almost treble their value at the open. Investors seem still to share Mr Lenigas’ optimism that the limestone below is “like a big sponge.” They will hope it’s as easy to squeeze.