Falklands : Colin Phipps Talks of Rising Falklands Oil Prospects
Submitted by Falkland Islands News Network (Juanita Brock) 10.11.2004 (Article Archived on 24.11.2004)
The high price of oil at the moment is worrying economists and city analysts here in London, as they fear it might push up the general level of inflation. Deborah Vogle of the BBC World Service's "Calling the Falklands" tells us more.
COLIN PHIPPS TALKS OF RISING FALKLANDS OIL PROSPECTS
A Report for BBC World Service “Calling the Falklands” by Deborah Vogle (DV) 09 NOV 2004
The high price of oil at the moment is worrying economists and city analysts here in London, as they fear it might push up the general level of inflation. Last month prices reached a record high at $55.00 a barrel. Now they are down to just under $50.00 – still very high. So, the long awaited results of the latest exploration in the Falklands could be encouraging. The seismic survey carried out by Desire Petroleum in the North Falkland Basin is the second, which has been done in the area but this time it was a 3D seismic survey rather than a 2Dimentional one. And that, according to Dr. Colin Phipps (CP) Chairman of Desire, produces a far more accurate picture. So what. I asked him, did the picture show?
CP: The whole purpose of the 3Ds was that – we had already ascertained from exploratory drilling that we had a very rich source rock in the North Falkland Basin. The most important thing was to find out whether and where a reservoir had developed. And, the thing about 3D is it does enable you to take out vertical latitudes. I won’t go into it in detail but you are able to manipulate 3D data to indicate the likelihood or otherwise of there being reservoirs. They also have direct hydrocarbon indicators that the possibility of a seismic response, which doesn’t actually tell you there’s oil and gas but it’s indicative of oil and gas and we have looked at those as well. The results of the 3D survey have been that we have been able to identify the development of reservoir rocks. And, there are also oil and gas direct hydrocarbon indicators. The gas one is particularly interesting now because, when we first drilled gas was at a price, which never would have been economic to develop in the Falklands. But at current gas prices, even gas would be economic, so it adds a further dimension to the potential of the basin.
DV: How exactly would that be used?
CP: The Gas would have to be brought on shore and it would be subject to what is known as Gas to Liquid Technology (GLT), which effectively turns gas into diesel oil. And, it’s very high quality diesel, which you can put in your Land Rover straight away and drive off with it. And, there is something of a premium attached with it. And, that is one of the reasons of this gas to liquid technology that has made a lot of remote gas fields much more potentially profitable than in the past. It’s a relatively new technology.
DV: So, can you put a figure on the likely output of this area?
CP: It’s very hard to say. The number of prospects that we have identified is quite large six to ten. The potential of the prospects – and let me be clear, potential doesn’t mean to say that there is oil there or gas there of that size. But the potential is for discoveries up to a billion barrels in size. A billion barrels is a giant field in world terms.
DV: This is potentially very exciting news. Ow is the stock market responding to it?
CP: Today Desire share price went up from 28 yesterday to 37.5 at the moment. But it jumps about a bit and in the end, the stock market reaction is only going to be justified by drilling and finding some oil.
DV: But it is a good time. You mentioned the gas price being good but also the oil price is good.
CP: The oil price is sensational at the moment. I don’t believe it could stay up there but most of the economics that we have done on the North Falkland Basin have been on the level of $16.00 oil or $20.00 oil. Of course, today, we are looking at the high $40s. So it would be extremely possible, really, to find something. But even at $25.00 oil, it’s very profitable.
DV: So, what’s the next step then?
CP: We really have to make a decision as to whether or not we are going to farm out these other partners. We are talking to a number of companies who are looking at the 3D data now that it’s been completed. Or, of course, we have to consider whether or not we should raise money in the market ourselves. The market is very strong at the moment and a lot of our shareholders are saying that they would like us to that. We have some decisions to make over the next sort of month or so as to what is going to be the best route for shareholders to take. One way or another, what we are hoping to do is to drill sometime next year.
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