MercoPress. South Atlantic News Agency

FOGL and BHP Billiton committed to drill a well in north Falkland basin

The joint venture has been unable to contract a rig

Falkland Oil & Gas Ltd and associate BHP Billiton have been granted by the Falkland Islands government an extension of Phase I of their northern Falkland licences and should be drilling one exploration well before 15 December 2011, according to a release from the FOGL. BHPB Petroleum (Falklands) is part of the larger Anglo-Australian BHP Billiton resources conglomerate.

The joint venture which has BHPB as operator with 51% of equity holding, has been trying to locate a suitable rig to drill the deep-water program in the Northern Licences but the number of rigs designed to operate in this environment is limited.

“The rig market has shown signs of improvement over the last 6 months but it has not been possible to conclude a rig contract. The Falkland Island Government recognizes these difficulties and has granted the one year extension”, said FOGL.

No outstanding work obligations or acreage relinquishment are required based on the agreement with the Falklands’ government.

FOGL believes “the North Falkland Licences remain highly prospective and include Loligo, Nimrod, Hersilia and Endeavour prospects”.

However FOGL also holds licensed areas to the south of the Falklands awarded in 2002. But associate BHP Billiton has decided to relinquish operator-ship of the Southern Licence Area and assign its 51% holding back to FOGL. This decision has no impact on the joint venture relationship in the Northern Licence Area.

In the Southern Licence area work obligations for Phase I was fulfilled by drilling the FI61/5-1 (Toroa) well. Based on the drilling results, FOGL has elected to enter Phase II of these licences which commences on 3 December 2010. The work obligation for Phase II is the drilling of one well before December 2015.

Following the withdrawal of BHPB Petroleum from the Southern Licences, FOGL will become the operator with 100% equity in the licences.

At the time, last July, FOGL said that “the well did not encounter any reservoired hydrocarbons and will now be plugged and abandoned”.

In its latest statement FOGL said that the Toroa well tested only one play in a large basin with many independent prospects and plays. “Drilling in our Northern Licences or drilling results from Borders and Southern Petroleum, could confirm the potential of this acreage. In addition many analyses are ongoing from the Toroa well which will provide further insight on these licences”.

FOGL top ranked prospects in the south are Vinson, Diomedea, Thulla, Inflexible Undine and Lutra. “We believe their prospectivity remains unaffected by the Toroa result”.