Any find made off the Falkland Islands will need to have reserves of at least 140 million bbl of oil to justify development, and the most likely development option is a floater.
This is the view of Wood Mackenzie Consultants Ltd., Edinburgh, which said that, while the current Falklands drilling program has produced no significant discoveries as yet, the size of any discovery will be a key issue with current low oil prices.
"The Falkland Islands acreage is high-risk frontier exploration within a remote and harsh environment," said the analyst. "This is reflected in the well costs, estimated at $25-30 million/well."
Drilling results
Earlier this year, four operators jointly chartered the Borgny Dolphin semisubmersible rig to drill five wells in the virgin offshore play north of the Falklands (OGJ, Feb. 23, 1998, p. 30).Amerada Hess Ltd. spudded the first well, 14/9-1, in late April, targeting the Orca prospect. The well was drilled to 2,615 m total measured depth, said Wood Mackenzie: "Downhole logs indicated the presence of shows of oil, but the partners elected to abandon the well without testing."
Amerada Hess late last month plugged and abandoned its second well off the Falkland Islands as a dry hole. The 14/9-2 well was drilled to 2,371 m TD during Oct. 13-28, revealing oil shows. Amerada said the well was intended to test a play concept different from earlier wells in the area.
In June, Lasmo plc, London, drilled the 14/13-1 wildcat on Minke prospect, to a total measured depth of 1,550 m. The well was reported to be a dry hole but to have penetrated potential reservoir formations.
In July, Shell Exploration & Production Southwest Atlantic BV spudded the 14/5-1A wildcat on Sebald prospect. The well was drilled to a total measured depth of 4,525 m and in water 464 m deep.
"Oil and gas were encountered at various levels," said Wood Mackenzie, "but not in commercial quantities. The well has been plugged and abandoned."
In August, the rig spudded the 14/24-1 wildcat in Breala prospect for operator International Petroleum Corp., Vancouver, B.C. The well will be drilled to 3,750 m total measured depth, after which the rig will transfer to Shell to drill a second well on its Tranche B acreage.
Earlier this month, Lundin Oil AB, Vancouver, B.C., announced the results of subsidiary Sodra Petroleum's first well, 14/24-1 in Tranch F. The well, drilled to 9,642 ft TD, encountered several oil source rock intervals and porous sandstone but did not encounter any oil or gas.
Development prospects
"Given the harsh working environment and deep waters," said Wood Mackenzie, "any commercial discovery will likely be developed via a floating production, storage, and offloading vessel with tanker offtake straight to the market. Any construction of offshore infrastructure is considered very unlikely, at least in the early stages."The analyst expects that the price of Brent crude oil will average $16/bbl this year, rising to $18/bbl in 1999, but said it is difficult to predict the oil price in 2003, when first oil production from the Falklands is possible.
Assuming this anticipated oil price rise, Wood Mackenzie reckons a minimum of 140 million bbl of oil would be needed for a viable development prospect offshore the Falklands.
"However, if the oil price were to remain low," said Wood Mackenzie, "perhaps averaging $16/bbl in 1999 and flat in real terms thereafter, development of any field below 200 million bbl would be extremely difficult."
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