Excitement over the Falkland Islands' oil and gas potential has re-ignited, as first Desire Petroleum announced it had found a rig that could start drilling early next year, and a day later Rockhopper Exploration announced that it had secured a farm-in partner that could make its planned drilling campaign a reality, too.
Desire has exchanged a letter of intent with Diamond Offshore Drilling for the rig Ocean Guardian to undertake a drilling campaign in the North Falkland Basin. Currently in the North Sea, the rig will mobilise in November and is expected to begin drilling in the Falklands next February. Desire will drill a minimum of four wells and plans to drill as many wells as possible beyond that to test the area's full potential. This may require Desire to raise additional funds. Rockhopper has signed a letter of intent with an as yet unnamed energy company for a farm-in to one of its licences.
These two developments could dovetail perfectly. Desire and Rockhopper are both exploring in the relatively shallow North basin and could share a rig. In May, Rockhopper announced the first Falklands hydrocarbon 'discovery', which resulted from the reinterpretation of a well drilled by Shell a decade earlier. The discovery's best estimate contingent resource is 1.6 trillion cubic feet of gas, which though huge is not currently considered commercial given its remoteness. But a further gas discovery in the area or an incoming partner looking for gas could make this a more attractive development.
The waters of the South basin are deeper than those in the North basin and beyond the capability of Desire's rig. Tim Bushell, chief executive of Falkland Oil and Gas (FOGL), one of the explorers in the South basin, commented that it was looking increasingly likely that the north and south would have separate drilling campaigns.
FOGL and its partner BHP Billiton will shortly be submitting drill permit applications and remain on target to drill probably late next year, subject to securing their own rig. As Mr Bushell observes: "It could be an exciting year for the Falklands."
