Falkland Islands oil hopes dampened

Remember the excitement (and controversy) about new drilling for oil off the Falklands Islands by four UK companies?

Well, some initial exploratory drilling results are in, and they don’t sound especially promising:

The primary Liz target was encountered at around 2550 metres with indications of hydrocarbons while drilling. Subsequent logging operations have shown that oil may be present in thin intervals but that reservoir quality is poor. Wireline sampling is still to be carried out.  Deeper gas shows have also been encountered while drilling, particularly below 3400 metres and these have still to be evaluated by wireline logging and sampling.

Until the logging is complete and the results analysed it will not be possible to determine the significance of the hydrocarbons encountered and whether the well will need to be drilled deeper, suspended for testing or plugged and abandoned.

Desire Petroleum, the aim-listed company that issued the above statement, concluded by saying a full update would be released later in the week when the operation had concluded (a report in the Sunday Times forced Monday’s statement).

Desire’s shares have taken a tumble along with, to a lesser extent, its three fellow Falklands explorers: Rockhopper, Falklands Oil and Gas, and Borders and Southern.

This could of course turn out to be an overreaction – none of the other three companies have progressed as far as Desire with drilling and all, including Desire itself, hold stakes in other Falkland Islands offshore fields that are yet to be assessed.

But, if all else fails, there’s always Greenland.

Related links:

Falklands oil questions are about payloads, not politics (FT Energy Source)
Oil plays in 2010: Falklands and Greenland compared (FT Energy Source)
Gotcha! The Falkland Islands revisited (FT Alphaville)

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