The joint venture, which includes Australian-listed company Magellan Petroleum Australia and Black Rock Oil & Gas, a company headed by Australian Ivan Burgess, found continuous oil indications with calculated saturations up to 38% over a 20m interval (true vertical thickness).

But logging data suggests the reservoir formation at this location is in the oil/water transition zone and significantly deeper than the oil/water contact calculated from data obtained in the original Sandhills-1 well drilled back in 1982 by British Gas (now BG Group).

The group will now come back up the well and kick off on a sidetrack (Sandhills-2Z) in open hole under the 95/8 inch casing shoe in a northerly direction towards Sandhill-1 where the Jurassic-age Great Oolite Formation reservoir is expected to be in the oil zone. The new plan is to set 7 inch liner casing at the top of this formation and core the reservoir unit. Testing will then take place in open hole.

Northern, Magellan and Black Rock took up permits on the Isle of Wight and the mainland close to Southampton (as well as a permit further east about 30km southeast of London) about two years ago.

The group believes the advances in seismic processing and interpretation techniques since the 1980s make this region well worth pursuing.

The Isle of Wight/Southampton region has the most immediate potential because it lies on trend and about 15km northeast of the BP-operated, 450 million barrel Wytch Farm field discovered in 1973.

A flurry of activity during the 1970s and early 1980s uncovered about eight other smaller oil fields and two gas fields in the surrounding Wessex Basin area, but failed to find more major finds. By the 1990s interest had dissipated.

Postmortems have shown that all the large structures drilled were formed after oil migration, or the wells targeting them were drilled in areas of migration shadow.

This may preclude the chance of finding another Wytch Farm in the area but, in any case, the Northern Petroleum/Magellan/Black Rock targets are of more modest size. The 1982 Sandhills-1 wildcat found strong oil shows in the Great Oolite Formation, although British Gas at the time considered them too small to be of interest when it was after a bigger prize in the underlying Triassic-age Sherwood Sandstone in a structure similar to Wytch Farm.

The Northern Petroleum group believes the Sandhills structure has potential for 12-50 million barrels of oil which, if realised, will provide an economic development at today’s high prices especially since the Isle of Wight is only 15km from the Fawley oil refinery on the mainland.

Nor is Sandhills the only structure in the permit. On completion, the rig will be moved to a second prospect on the island called Bouldner Copse-1 located on the island further to the west.

Northern Petroleum has a 57.5% interest, Magellan Petroleum 22.5%, Oil Quest Resource plc 7.5%, Black Rock 5% and Montrose Industries Ltd 5%.