August 21, 2009 / 10:30 AM / 10 years ago

English village quails at prospect of new oil rush

COLDHARBOUR, England (Reuters) - The affluent English county of Surrey — with its rolling hills, historic tiled houses and ancient oak woodlands to the south of London — may not seem the most obvious place to prospect for oil.

Racegoers watch the third race of the Epsom Derby Festival at Epsom Downs in Surrey, southern England June 6, 2008. REUTERS/Alessia Pierdomenico

But two companies are working together to drill an exploratory well there and say a change in tax law could help to step up exploration elsewhere in British shires.

They face stiff local opposition.

Residents in the village of Coldharbour, which has 250 inhabitants, one pub and no store, are less than keen to have a nodding donkey in view of their homes.

“The oil is over there, under the church in the village,” said Stuart McLachlan, standing on a wooded hill and pointing in the direction of Coldharbour’s Victorian stone church.

London-listed Europa Oil & Gas and Egdon Resources are seeking approval from Surrey County Council to drill a well on a hill 1.5 km from the village, and tap in horizontally.

Europa’s CEO Paul Barrett said drilling an exploratory well costs $2.5 million and lifting costs would be modest at around $10-$20 a barrel.

He insisted the local residents, who need cars to supplement the village’s limited public transport, should not fear for their environment.

“With the right amount of planning, the right environmental impact assessments, doing everything properly, you can really do that without disturbing anyone,” Barrett told Reuters.

He said Europa had successfully managed an oil rig in eastern England 50 meters from a wildlife park.

Between 2004 and 2008, Egdon made a pretax loss each year, according to Reuters data. Europa, meanwhile, remained profitable with net cash of 2.8 million pounds ($4.63 million) as of July 2008.


McLachlan, a village resident who formed a 1,000-member citizens’ opposition group, said the chief problem was accessing the well site. Europa would have to drive dozens of large trucks down a tree-lined road so narrow, two cars cannot easily pass.

“They are trying to do this in the cheapest way,” McLachlan said, steering his car down the village’s main road, lined with very old trees, which he said large trucks would probably uproot.

McLachlan said there was an alternative site closer to a more major road on which the oil rig could be placed, but costs could rise because it is slightly further away from the oil.

Europa and Egdon are not the only companies interested in British onshore oil. In its last licensing round last year Britain granted 96 new licenses for onshore exploration to 54 companies

The counties of Surrey, Lincolnshire, Dorset have all received requests from companies in the past two years.

In April, Britain cut the income tax on companies drilling in fields with less than 25 million barrels of recoverable reserves on the UK continental shelf. Europa and Egdon said the change encourages them to increase exploration.

One Surrey county councilor opposed to their presence in Mole Valley, the region in which the village is located, said it would be of no financial benefit.

“Cold Harbour is totally inappropriate for this type of development,” said Councilor Hazel Watson. “It would bring structure and equipment and large vehicles into the countryside.”

Mark Abbott, Egdon’s CEO, said traffic disruption would be minimized and due care would be given to the environment.

“We’re looking at trying to explore in a very sensitive area in Cold Harbour. We tried to come up with a proposal which minimizes any impact,” Abbott said. “It’s everybody’s democratic right... to have an opinion on things.”

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