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Oil in Falklands but not in commercial volumes, reports The Times

Sunday, March 28th 2010 - 04:56 UTC
Full article 131 comments
The exploration rig Ocean Guardian operating to the north of the Falklands The exploration rig Ocean Guardian operating to the north of the Falklands

The first well drilled off the Falkland Islands in 12 years has struck oil — but not enough for a commercial well, according to a report from the Sunday edition of The Times.

Desire Petroleum, the UK explorer that contracted the exploration rig “Ocean Guardian” is expected to announce the disappointing findings this week, according to industry sources.

The Times speculates the news could defuse the political row that erupted between London and Buenos Aires after a group of British oil exploration companies led by Desire Petroleum announced plans to drill wells in the territorial waters of the Falklands which are claimed by Argentina.

President Cristina Kirchner claimed the campaign violated its national sovereignty. Hillary Clinton, US secretary of state, declined to side with Britain and suggested that the matter be referred to the UN.

Desire is expected to say that the well drilled at its Liz prospect was “technically successful”, meaning it found oil, but that it is “non-commercial”, meaning that there was not enough oil to justify developing the field.

According to The Times, the company declined to comment. Sources close to the situation said it had not finished drilling, but the signs were not encouraging.

A source said: “It’s not a duster [a dry well], but it’s not commercially successful.” Desire has been working on the well for the past month.

Its disappointment is not the end of the Falklands oil story. Desire is one of four UK-listed firms that have raised £250 million from investors in recent months to fund an exploration spree around the islands.

Rockhopper Exploration will drill its Sea Lion prospect next month. That will be followed by one well from Falkland Oil and Gas, before Rockhopper takes the rig back to drill another.

Falkland Oil and Gas has linked up with BHP Billiton, the Anglo-Australian group that is one of the world’s largest miners.

Borders & Southern, the other British firm, is further behind because its acreage in the deeper waters south of the islands requires a different type of rig — the other fields are in the north.

Desire’s news is likely to depress its share price, and those of its Falklands-focused rivals. The firm has stakes in several other blocks that are expected to be drilled in the next 18 months.

Twelve years ago several companies, including Shell Oil, drilled wells but with similar limited success: not enough oil or gas for commercial exploitations.

At the time also, 1998, international oil prices plunged to 10 US dollars a barrel definitively discouraging any further exploration.

 

Top Comments

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  • gdr

    Britons must develop their Geology Knowledges !

    there are some oil reserves around Malvinas.. but :
    every Chile earthquake pull them into the buttom of Pampa
    not push out to the Ocean !

    what a sexy Natural Operation !!

    authority gdr.

    Mar 28th, 2010 - 10:10 am 0
  • Hoytred

    Disappointing, ... but 4 more wells yet to go !

    Mar 28th, 2010 - 10:47 am 0
  • Beef

    This may at first appear to be bad news and the awful journalism will certainly affect the SP (unless the shares are suspended due to this pre RNS media report). From what I have been reading then we are likley to see an RNS at 7am (BST) which will clarify the situation. What this report indicates is that this area contains more than sand and from my understanding this drill was not designed to determine the commercial viability of the Liz (or Liz & Beth prospect); although I an no expert in oil drilling and am not preteding to be (I am a health economist by trade).

    There is a total of 18 months of drilling to continue, with RKH and FOGL the next companies to drill. This gap will give DES the chance to study the data to decide how to progress with drilling. My shares are staying in my account and I will either lose a litte (I am comfortable which what I stand to lose) or gain a lot. The fact that this was considered a technically successful drill means that there is a working hydrocarbon system that supports the seismic data.

    This is exploration, and valuable data will have been gathered. The SP will be up and down over the next year or so. I am wating until the end game.

    Dr Beef

    Mar 28th, 2010 - 07:16 pm 0
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