Is there profitable oil in the Falklands? Ask Wikileaks

Yesterday Desire Petroleum’s shares jumped more than a quarter, which can only mean one thing: oil in the Falklands.

As The Times reported (£):

In an announcement that could exacerbate tensions over the islands’ sovereignty with Argentina, Desire said that its offshore Rachel North well had been drilled to a depth of more than 3 kilometres and discovered a 57-metre thick belt of oil interspersed with layers of sand and shale.

The argument about whether there is enough readily-extracted oil to make a profit in the Falklands is almost as long and bitter as the one about who owns them.

Chris Thompson wrote a brilliant piece in the FT summing up the bumpy ride that Falklands explorers have endured. He quoted some of the differing views in the marketplace as to whether the bet taken by Desire, Rockhopper, Falklands Oil & Gas and Borders and Southern to resume drilling in the area will pay off.

For Falklands bulls, Desire’s find will repair some of the damage done by Rockhopper’s reduction of the estimated capacity of its showpiece Sea Lion well in October. But, as so often in this story, hard on the heels of the good news follows the bad.

It has now emerged that one of the Wikileaks cables contains the views of Brad Corson, chairman of ExxonMobil international. This is what the US ambassador to the UK wrote about a meeting he had with Corson:

ExxonMobil International Chairman Brad Corson told us he does not believe there is enough oil on the Falkland Islands Continental Shelf to be profitable, citing Shell’s earlier oil exploration attempts which they abandoned.

It seems damaging at face value, not least because Corson reportedly said this in or just before February 2010, when the oil price was much higher than the $10-a-barrel it was when Shell abandoned the area. But his view is likely simply to amplify rather than clarify the debate. There is no reason to think he has any knowledge of the situation not already known to the market, and his citation of Shell’s failure is unlikely to convince backers of independents, especially with the oil price rising .

Sure enough, Desire’s shares have held on to yesterday’s gains:

And those of Rockhopper, Falklands Oil & Gas and Borders and Southern are similarly unmoved:

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