Falklands awards seven exploration licenses

The government of the Falkland Islands has awarded seven exploration licenses covering areas to the north of the islands totaling 12,800 sq km.

Bidders in the round applied only for acreage to the north of the South Atlantic islands, where a number of large targets have been identified by "loose grid" seismic data acquired ahead of the licensing round.

Falklands government said no bids were received for acreage to the south, because of the area's deep water and paucity of geological information to date.

Last year, the Falklands government offered more than 44,000 sq km of virgin offshore territory to international bidders, divided into 19 tranches covering 215-250 sq km (OGJ, Oct. 9, 1995, p. 36).

License awards

Acreage allocations are (see table, p. 43, for equity interests):

Tranche A to operator Amerada Hess (Falkland Islands) Ltd., Fina Exploration Atlantic BV, Murphy South Atlantic Oil Co., Teikoku Oil Co. Ltd., and Argos Evergreen Ltd.

Tranche B to operator Shell Exploration BV and Agip Exploration BV.

Tranches C and D to operator Lasmo International Ltd., Desire Petroleum Ltd., Malvern, U.K., and Clyde Expro plc, Ledbury, U.K.

Tranche F to operator International Petroleum Corp., Vancouver, B.C., and Sands Petroleum AB.

Tranches I and L outright to Desire Petroleum.

Operators are expected to spend a total $150 million on seismic acquisition and drilling commitments the next 5 years and at least $120 million on further exploration thereafter.

Successful bidders have committed to drill a total of seven wells during the first phase of exploration, with a further five conditional wells. Four more wells have been committed to under second-phase exploration.

Tranches A, B, and C are believed to hold the hottest prospects and to have the bulk of drilling commitments. Some tranches carry two obligation wells plus one conditional well, while the more southerly licenses carry only conditional drilling requirements.

All the largest targets identified in seismic data are expected to be drilled within the next 3-4 years, while a number of smaller targets are likely to be drilled later.

A seismic survey to gather about 10,000 line km of detailed data is expected to begin next year, and 3D seismic data acquisition also is planned.

Shell/Agip plans

Agip, the upstream unit of Italy's state-owned conglomerate, disclosed plans for the Tranche B license it acquired with Shell.

The Tranche B blocks cover a combined 1,621 sq km.

The Shell/Agip joint venture will begin work in 1997 with a 2D and 3D seismic survey, followed by two exploratory wells.

Projected initial exploration investment is put at $50 million.

Agip said the Falkland Islands basin is expected to be highly prospective for oil discoveries.

British Gas/YPF missing

Conspicuous by its absence from the list of winning bidders was a combine of British Gas plc and Argentina's YPF SA, formed to bid for Falklands acreage.

Falklands government had ruled that no Argentine company would be able to acquire a majority shareholding in any license in the round, because of the U.K./Argentine war over Falklands sovereignty in the early 1980s.

However, the government apparently ruled against the British Gas/YPF bid on the grounds of its lower work commitment proposals. The combine is believed to have bid only for Tranches A and B.

British Gas said, "Along with YPF, we decided on a proposed work program that we thought appropriate, but this was different from the conclusions of other companies.

"We will watch progress in the South Atlantic with interest, and we are reviewing whether or not to try to join other license groups."

Surprising Desire

With a 25% stake in two licenses and outright ownership of two others, the comparatively unknown Desire Petroleum stands to end up with a major slice of any Falklands shelf discoveries.

The company was formed specifically to bid in this round by Colin Phipps, former chairman of Clyde; Rex Hunt, former governor of the Falkland Islands; and Lewis Clifton, former Falkland Islands representative to Britain.

Desire is owned by the founders and a group of other Falkland Island investors, along with a 20% shareholding held by Westmount Energy Ltd., St. Helier, Jersey.

Of Desire's plans, Phipps said, "First, we've got to grade our acreage; we hope to acquire seismic in first quarter 1997. And only then will we take decisions about future funding. Desire's shareholders are capable of funding the envisaged exploration and drilling program.

"Any later farmout would be more because of lack of technological infrastructure than for financial reasons."