MercoPress. South Atlantic News Agency

Oil company confirms Falklands drilling and farm-out accord in coming months

The Leiv Eiriksson rig is expected in Falkland’s waters at the end of the year

Falkland Oil & Gas confirmed on Wednesday drilling operations will begin in the first quarter of 2012 and revealed it is in early talks with firms interested in taking part in its exploration program south of the Falkland Islands. The company however anticipated it did not expect to conclude any farm-out agreement until later this year.

Separately, FOGL said it was planning to acquire some additional focused 2D seismic for its deeper Scotia and Hero prospects so that it can fine-tune the location of an exploration well on either of these two prospects.

Last month the firm revealed it had secured a rig contract for two slots and hopes to begin drilling on its prospects in the first quarter of 2012. The announcement came after it already confirmed it is to test the Loligo prospect - with estimated reserves of 4.7 billion barrels.

The agreement, inked with Borders & Southern Petroleum and Ocean Rig 1, is to use the Leiv Eiriksson rig.

The firm added then that it had sufficient funds for a second appraisal well on either Loligo, or on one of the other high ranked prospects such as Nimrod, Vinson or Inflexible and was considering targeting Scotia or Hero but this would involve additional cost due to their greater depth.

FOGL chief executive Tim Bushell said that: “Since becoming operator and 100 percent owner of our licences on 31 March, we have secured a suitable rig, put in place funding for a 2 well programme and have established an experienced drilling management team.

”We have also accelerated all the other required work streams in preparation for our drilling programme which is expected to commence in the first quarter of 2012.”

The firm said it had made progress in establishing a strong and experienced drilling team managed by Dave MacKay - a specialist in deepwater drilling. Mike Thomas has also joined as operations manager.

Also last month the Executive Council of the Falkland Islands approved the withdrawal of BHP Billiton from the northern licence area and the transfer of operator-ship to FOGL.

The Council also approved a six month extension of Phase 1 of the northern licence area from 15 December to 15 June 2012. This extension requires the final approval of the Foreign Office, which is expected shortly.

FOGL is required to make a mandatory relinquishment of 20% of the Northern Licence area at the end of 2011 as required under the existing licence terms. The second phase of the Northern licence area does not expire until 15 December 2015 and carries the obligation to drill a single exploration well.

FOGL has already entered Phase 2 of the Southern Licence area and no further relinquishment is required. FOGL is focused on extensive licence areas to the South and East of the Falkland Islands.