Falklands : Hydrocarbons Daily Record (04 October 2007)
Submitted by Falkland Islands News Network (Juanita Brock) 05.10.2007 (Article Archived on 19.10.2007)
BHP Billiton assessed the risk of exploration in the South and East Falklands Basins before they decided to farm-in with FOGL.
HYDROCARBONS DAILY RECORD: THURSDAY, 04 OCTOBER 2007
By J. Brock (FINN)
TODAY’S BIG NEWS:
(Falkland Islands)
OIL OPERATORS’ PUBLIC MEETING REPORT (04/10/2007)
By J. Brock (FINN)
An oil operators’ public meeting was held in the Court and Council Chamber of the Town Hall at 1700hrs on Thursday, 04 October 2007. Present were Mrs. Phyl Rendell, Director of Minerals and Agriculture, Dr. Phil Richards, British Geological Survey (GBS), Cllr. Dr. Andrea Clausen, Dr. Colin Phipps (DES), Mr Tim Bushell (FOGL), Dr Howard Obee (BOR), Mr. Sam Moody (RKH), Mr. John Hogan (ARGOS) and Dr John Perry (RPS).
Mr. Tim Bushell gave a Power-Point presentation on behalf of the operators present and began by telling the 30 members of the public that were present that the North, South and East Falklands Basins were near the Magalanes and Malvinas Basins to the south and east where commercial amounts of oil are being discovered and exploited.
He then went into a brief history of exploration in the North Falklands Basin in 1997/98, commenting that there were six wells drilled and though no commercial quantities of hydrocarbons found Desire Petroleum carried on with additional seismic. Other companies such as Rockhopper Petroleum and Argos operating in the north and FOGL and Borders & Southern decided to explore in the south. In this new round of exploration interest there has been no exploration drilling though Desire Petroleum is ready to drill as soon as a rig is available.
Mr. Bushell said that it was good to have BHP Billiton sign a farm-in agreement because it meant that an appropriate rig could become available sooner rather than later and an agreement signed means that exploration wells had to be drilled within the next three years. He went on to say that other large oil companies could be interested in the area if they think BHP Billiton could be successful.
The risk level also has to be dealt with. Thanks to new technology like 3D seismic and CSEM there is a better picture of what is beneath the seabed in the prospects that have been pin-pointed by the 3D Seismic. Big companies are not willing to invest unless the risk assessment is one in three at least. This is a frontier area and this must be taken into account when investing. Mr. Bushell said the sovereignty issue is in the background as well.
Dr. John Perry then presented a slide show about the Environmental Impact Assessment process. It was RPS that did the Environmental Impact Assessment for Desire Petroleum in 2005/06. He said that before any drilling goes on the assessment has to be done. Baseline studies have to be done but if there is any missing information it has to be acquired before the assessment report is presented in the Gazette, for public consultation, and on to the UK for review.
Mr. Bushell then explained the Farm-in deal with BHP Billiton by saying that FOGL had been approached by them and it took a year for them to make a decision to take the risk to explore in the South and East Falklands Basins. BHP have a successful deep water drilling programme and the appropriate drill ships to complete exploration here. There could be 6 to 10 wells and the rig or drill ship would be committed for a year. Mr. Bushell and a representative from BHP will be coming to the Falklands in January.
He went on to say that acquiring the right rig to do the job would be easier for BHP. There was mention of an LNG plant that could be a possibility for an offshore island in the Falklands. This is only a possibility, he stressed and it would only come about if large commercially viable amounts of natural gas were found.
A member of the public asked how it was possible to estimate how much resource was beneath the seabed. Dr. Phipps explained that with new technology the size of the “Traps” could be assessed and the amount of hydrocarbons in them could be estimated.
Oil slicks had been found via satellite in the North Falklands Basin and the Shell data indicated that the thick source rock extends that far north. Estimates of 60Billion barrels in the area that have been created and expelled have been identified by Shell.
FOGL has found oil and gas chimneys that are easy to identify because oil has a calming affect on the sea. Several passes of the satellite helped to discern whether it was a ship clearing out its bilges or a true oil/gas chimney.
Operators agreed that data from each new well would be shared as the drill rig/ship would be shared. Dr Phipps explained that there are 30 new rigs ready to begin service as well as old rigs being refurbished and the increased numbers would help to bring the per day price down. He explained that a drill ship or a dynamically positioned rig would be suitable in all water depths around the Falklands. A drill ship is easier to move around than a dynamically positioned rig and money could be saved using a drill ship due to the time savings transiting between one prospect and another.
A question was asked about support services and onshore activity. Business would increase in many areas – food, accommodation, warehousing, office space, etc. There would need to be unspecified facilities for a helicopter at the Stanley Airport and 24/7 access for all infrastructure involved with the oil business.
CRUDE PRICES:
At 1830hrs LMT on Thursday, 04 October 2007 Light Sweet Crude was trading at $81.44 up $1.40 on the New York Mercantile Exchange. Brent Crude was trading at $78.95 up $1.76 on London’s ICE Futures Market.
ANALYSIS:
North sea output has declined for the 5th month in a row and this caused Brent Crude prices to increase today. Despite yesterday’s inventory report, supply concerns in the US have caused an increase in Light Sweet Crude prices today.
THE MARKETS: 04 OCTOBER 2007:
FTSE100: 6,547.90 up 12.69, FTSE250: 11,370.50 up 12.69, SmallCap: 3,800.10 down 4.91
DJI: 13,974.31 up 6.26, NASDAQ: 2,733.57 up 4.14 S&P500: 1,542.84 up 3.25
INTERNATIONAL DEVELOPMENTS:
(Russia)
Lukoil has announced that it will set up a joint venture with the state-owned Gazprom in the Timan-Pechora province. The joint venture could also operate in eastern Siberia. It is expected that a final deal will be signed within the next two months. Lukoil has a joint venture with US Conoco/Phillips in the Timan-Pechora province.
(Canada)
A newspaper article published in Canada says that Talisman Energy Inc., a natural-gas and oil producer, already cut its 2008 spending plan in Alberta by C$500 million ($502.6 million) because of low fuel prices and will slash another C$500 million should the province enact proposed increases in royalties. The royalty rates recommended last month by a government- appointed panel would make more gas wells uneconomical, leading to losses of jobs and taxes, Calgary-based Talisman posted the letter today in a press statement.
REGIONAL DEVELOPMENTS:
(Brazil)
Latin American newspapers report that Petrobras, Brazil’s state owned energy corporation, will to invest US$ 18.2 billion, for the exploration, production and supply of natural gas demand in the country. US$ 18.2 billion, US$ 4.5 billion will be turned directly to the expansion of the gas pipeline grid and to the construction of liquefied natural gas (LNG) re-gasification terminals. US$ 1.9 billion will go to energy development (bio-diesel, wind energy and other alternative sources) and electrical energy.
RELEVANT SHARE PRICES 04 OCTOBER 2007:
TLW: 594.00 down 4.00, DES: 28.25 down 1.00, FOGL: 142.00 down 11.50, RKH: 50.00 down 0.50, BOR: 36.00 unchanged, PRE: 13.50 unchanged, GBP: 8.63 down 0.63, GPK: 420.00 unchanged, BLT 1702.00 down 45.00
Profit-taking is the reason given for the decline in exploration stocks today.
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