Britain strikes oil again – in the heart of Hardy country

The South-west may be more generally associated with England's green and pleasant lands than with its dark satanic mills. But the region that inspired Thomas Hardy to create the pastoral idyll of Wessex is also the unlikely centre of Britain's onshore oil industry. And the so-called Wessex Basin – which runs from the south coast of Dorset up into Hampshire and across the Solent to the Isle of Wight and beyond – still has more to offer.

Norwest Energy, an Australian oil and gas explorer operating in the region, yesterday confirmed that evaluation of early ground surveys and seismic studies indicates oil reserves of somewhere between 3.4 million and 53.9 million barrels across seven different prospects in three permit areas the company holds with partner Wessex Exploration.

Given that economic analysis suggests that anything above 400,000 barrels is commercially viable, Norwest and Wessex Exploration are upbeat about the prospects for the region – although it may be another two years before drilling can confirm the estimates. "The resource evaluation has determined that every one of these leads has the potential to exceed the minimum threshold of 400,000 barrels of oil," Peter Munachen, the chief executive of Norwest, said yesterday.

Britain's onshore hydrocarbons industry is a tiddler compared with its massive offshore cousin, producing barely a single per cent of its monthly oil output and even less gas. But there are sufficient resources to support a vibrant industry (see box), and the Wessex Basin has been a prime target since British Gas discovered the vast field at Wytch Farm in 1973.

Just a few miles from Corfe Castle, shielded in trees to the south of picturesque Poole Harbour, Wytch Farm's herd of "nodding donkey" oil wells – now operated by BP – pump away at Europe's largest onshore oil field. Production is currently running a 20,000 barrels per day, and since discovery the field has produced more than 400 million barrels of oil.

The Norwest finds may be a fraction of the size, but they are part of the same geological formation – which could mean both similarly good-quality oil and the potential of other nearby finds. "This is only just the beginning of something really big for the Wessex Basin," David Bramhill, a director of Wessex Exploration, said. "These are really early days, but this is an indication and potentially this is very big indeed."

There are considerable advantages to exploring and drilling in Britain, not least its reliable legal system, clear regulatory framework and supportive government, says Mr Bramhill, a veteran of the industry. But the UK is just not a "sexy" area compared with exotic overseas locations. "Not being rude, but it's about sex and violence," Mr Bramhill said. "People just don't care about the boring old UK when they can have Shanghai or the Falklands or Iceland or Africa."

Where Britain does suffer is that it is a slow and expensive place for explorers to work. Partly the issue is the relative scarcity of rigs. In the US, an explorer can have a rig in place and start drilling within as little as two weeks of receiving a licence, at a cost of around £1m. In the UK, the process takes far longer and could cost up to £3m. And the sclerotic planning process and strict environmental regulations also add to costs.

Modern regulations mean rigs are a far cry from the dark and satanic: BP has won environmental awards for Wytch Farm. But local protests are still a deterrent. The key is to involve local communities from the start, Mr Bramhill says. "What people don't like is when you come in all high-handed and start doing things without talking to the people," he said. "But if you involve the local community, then 99 times out of 100 people want to support you."

Notwithstanding the inveterate optimism of oil industry, there are unlikely to be any other vast discoveries onshore in the UK, according to Graham Sadler, the managing director of petroleum services at Deloitte.

But there are still material finds out there, as the Norwest estimates suggest. "There are a number of small players that are persevering with onshore oil and gas, despite the challenges around planning consent and so on," Mr Sadler said. "Onshore is cheaper to develop than offshore, which makes it quite attractive even at the smaller volumes."

Britain's nodding donkeys: A hidden industry

1. At Elswick, near Blackpool, Warwick Energy is producing 1MW of power from a facility situated on top of the company's own gas reserves.

2. Wessex Basin is the heartland of Britain's onshore oil industry. It is the site of Europe's largest onshore oil field, at Wytch Farm, which has produced more than 400 million barrels of oil over its 35-year life. The BP facility at Wytch Farm also processes oil trucked from two small fields at nearby Wareham and Kimmeridge.

3. Just along the coast, in the Weald Basin across Surrey, Hampshire and Sussex, Star Energy has nine producing oil fields. Palmers Wood hit the headlines in 2008 when Harrods owner Mohamed al-Fayed successfully sued for trespass and was awarded a 9 per cent share of the income from the facility.

4. The East Midlands Oil Province – a series of carboniferous rift basins spread across parts of Lincolnshire, Nottinghamshire and Leicestershire – is the only real rival to Wessex Basin. Welton is the UK's second largest onshore field, after Wytch Farm, and there are currently 18 producing wells in the region.

5. Gas fields at Ryedale, discovered in 1970, fuel a power station at East Knapton. Four further fields – at Kirby Misperton, Malton, Marishes and Pickering – are also in production.