Falklands : North Falkland Basin: High Risk for Good Prospects
Submitted by Falkland Islands News Network (Juanita Brock) 21.07.2004 (Article Archived on 04.08.2004)
With the Board of Desire Petroleum announcing on Tuesday that fast track processing of the 3D seismic survey carried out in tranches C and D in the North Falkland Basin comes the anticipation that detailed interpretation will provide excellent information as to where Desire will sink their first exploratory well.
NORTH FALKLAND BASIN: HIGH RISK FOR GOOD PROSPECTS
By J. Brock (FINN)
With the Board of Desire Petroleum announcing on Tuesday that fast track processing of the 3D seismic survey carried out in tranches C and D in the North Falkland Basin comes the anticipation that detailed interpretation will provide excellent ionformation as to where Desire will sink their first exploratory well. According to the press release, the re-worked and detailed analysis of the data will form the basis of farm-out negotiations with potential partners. It is expected that the data will be ready for this process at the end of the year, and the new year could see a rig brought down from Brazil to sink the first well, this according to the last interview Dr. Colin Phipps had with FINN.
Data and samples collected from the North Falkland Basin show that, while thick, the source rock, when penetrated in the right place will generate hydrocarbons. Dr Phipps had indicated that in many cases, the wells drilled thus far did not completely penetrate the source rock – an oversight that is not likely to happen during the forthcoming exploration.
It’s crunch time. One would hope that the rig will be placed above the right spot and a huge oil reserve will make investors very happy indeed. However, it is likely that any potential source will be capped while experts further analyze the data and samples. Dr. Phipps maintains that another well would be commercially drilled instead of using the one that was capped. That analysis could take months but the wait for an oilfield could also take years to realise. This depends on several factors.
When the oil companies pulled out of the North Falkland Basin in 1998, the price per barrel of Brendt Crude was averaging $10.00 per barrell. Now it is four times that amount. To break even in 1998, the industry needed an oil price of $14.50 per barrel now, nearer to $16.00, with some sources quoting higher. Who knows what the price per barrel will be by the time the oil is found and extracted commercially.
Though today’s oil prices may be conducive to sinking more exploratory wells, the North Falkland Basin is considered to be a frontier area. The costs of bringing in rigs and other infrastructure needed for the industry are tempered by time and transport prices. In our case, a rig must be brought in at great expense. This simply cannot happen overnight.
An excellent exploratory result also must be weighed against the need to extract hydrocarbons. Other oil provinces are generating enough oil at present to meet world demand. This could further change if exploration in those provicnes is fruitful. Good business decisions to opt for a frontier area need to be made on good financial advice, the preponderance of which points to investing in known provinces. If the risk of investing in a frontier area is too great, investors will opt for investments in oil provinces.
Conflicts, wars and politics also play their part in assessing whether or not a hydrocarbons industry can go ahead in any area. Though there is no conflict in the Falklands area at present, the costs of meeting political demands could outweigh any desire to do business here, for example the 3% tax the Argentines want to charge for commercial hydrocarbons taken from the North Falkland Basin. That issue still hasn’t been resolved.
There is an element of risk in any investment that you make, whether it be in the Mid-East, West Africa, or the North Falkland Basin. We Will not know whether we’ve got oil until that all-important “gusher” is reported. That takes many attempts, not just the exploratory wells that have already been drilled. It is my hope that those who take the risks for the oil industry here will have that happy ending.
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