Desire Petroleum

<>Desire Petroleum plc (Desire) is a UK company listed on the Alternative Investment Market (AIM) dedicated to exploring for oil and gas in the North Falkland Basin.

Desire has recently completed a 6 well exploration programme. The Liz well encountered dry gas and gas condensate at 2 separate levels while other wells recorded shows.
Together with the Rockhopper Exploration Sea Lion oil discovery in the licence to the north, these wells have provided significant encouragement for the potential of the North Falkland Basin. The oil at Sea Lion is of particular interest as this has demonstrated that oil is trapped in potentially significant quantities in a fan sandstone on the east flank of the basin. It is believed that over 50% of this east flank play fairway is on Desire operated acreage.

Desire has now completed new 3D seismic acquisition which provides coverage over the east flank play, Ann, Pam and Helen prospects. The results from fast-track processing of priority areas are provided in the 2011 CPR. A farm-out to Rockhopper has been announced. The revised equities are shown on the licence map (subject to regulatory approval and completion of the farm-in well). Desire Petroleum

Rockhopper Exploration

British Geological Survey

Argos Resources



Latest Press Realeses from Desire

A tight rig market but not overly so hopefully.

Snip from a trade mag.

Latin America
At the moment, activity in this market is humming along, although concerns about Mexico continue to surface. While initial beliefs were that Pemex was going to release rigs, this has proven not to be the case, and in fact, the company has tendered for additional rigs. The concern now appears to be over the upcoming presidential election this summer. Assuming the governments stance on offshore drilling remains the same, Pemex will bring in two or three additional jackups in 2006 and will continue to renew existing contracts when they expire. The operator has proven recently that it is willing to step up and pay the rates necessary to keep rigs in the region. In 2006, rates for new awards will eclipse $100,000 (up from rates in the $30,000s fixed in 2002/2003), rising to over $140,000 for larger units. In the other active country in this region, Trinidad, three of the five working jackups come up for renewal this year, with two likely to receive long-term extensions. Also, the Rowan Gorilla III will arrive this summer to begin a one-year plus one-year option contract with EOG Resources.

The floating rig fleet in this region is essentially tied up to mid-2008. Despite the fact that it will lose two drillships in the first-half of this year, Petrobras extended contracts for its floating rig fleet in 2005 and signed new contracts that will bring additional rigs to the area. Coupled with other operators plans for drilling in the area, no fewer than five floaters will mobilize to the area for contracts starting over the next few years. Elsewhere in the region, only one of seven semis will come up for renewal off Mexico in 2006 and that is not until October, so the market should remain balanced for the entire year

In finalizing its extensions earlier in 2005, Petrobras was able to avoid the meteoric rise in rates that occurred later in the year. The highest rate the operator fixed was $220,000 for a rig that today would likely command over $400,000 in any other market. In comparison, Shell signed two much shallower-rated units later in the year at $240,000 and $280,000, respectively

17.02.2006
Exploration - What Is Happening In The Falklands?

By David Bamford
______________________________________________________________




The year 2005 saw a lot of trailing of the hydrocarbon delights of the Falkland Isles, by the main licence holders Desire Petroleum, Rockhopper Exploration, Falklands Oil & Gas and Borders & Southern Petroleum, aided and abetted by the British Geological Survey (BGS). If one were to take at face value everything thats been said or written, then this is an area that has been by-passed, ignored or written-off by the majority of the worlds explorers, big and small, and yet may have the potential for billions of barrels of oil.

Its been argued that the whole area has been overlooked by the oil industry because water depths (between 500 and 1,500 metres) were previously out of reach, it is very remote and there was a hangover from the disappointing drilling campaign of the late 1990s in the North Falklands Basin, which in any case has a completely different geological make-up from the areas to the south of the Falklands.

Actually, the first two arguments seem a bit unlikely, given the global industrys willingness to tackle water depths up to 2000 metres (in Angola and the Gulf of Mexico, for example) and the long queues of companies - all with cheque book in hand - that form up anywhere on the planet nowadays, given the apparent dearth of good exploration opportunities (see my earlier article on "Twilight of Exploration).

So perhaps theres really something fundamentally wrong with the rocks offshore the Falklands?

Possibly the first thing to agree is that we are dealing with some geological variety between the North Falklands Basin, where Desire and Rockhopper have their licences and 6 exploration wells were drilled back-to-back in 1998, and the un-drilled South Falklands Basin, where Falklands Oil & Gas and Borders & Southern have dominant positions in two somewhat different geological settings.

Reading Desire Petroleums various presentations and trying to get behind them to what is being said about the rocks, its difficult to be sure that their technical advisers actually believe that there is a working hydrocarbon system in the North Falkland Basin, the further drilling of which will lead to discoveries.

The South Falklands Basin has, at first sight, rather more in its favour. For a source rock, one can appeal to Upper Jurassic to Aptian age marine black shales proven in scientific (DSDP project) wells on the Falklands Plateau to the east and also in exploration wells in the Malvinas Basin, offshore Argentina, to the west. For reservoir, the appeal is to the variety of Cretaceous and Tertiary reservoirs found in the Malvinas Basin, especially to the Lower Cretaceous Springhill Formation which forms the main reservoir there. However, the BGS has highlighted that drilling in the Argentine sector near the axis of the Malvinas Basin has been only partly successful, due largely to the unpredictable nature of the reservoir targets in the area and perhaps also because of a need for long-distance lateral migration of oil. In fact, Exxon, YPF and Oxy drilled 17 wells there; only 5 of them had encouraging shows of oil and gas in the under-charged Lower Cretaceous reservoir and just one, Calamar x-1 flowed oil (about 3,200 bpd of 37 API).

So a fundamental question for the South Falklands Basin is whether there is any evidence that it will be better than the Malvinas Basin in the matters of reservoir and the migration of generated oil and/or gas into prospects (the plumbing). In reality, the most likely loose end for the South Falklands Basin is that the plumbing may actually deteriorate as one moves a further 500km+ to the East from the Malvinas Basin. In addition, the equivalent, dry, basins in Southern Africa dont offer much support either when one reconstructs the South Atlantic to the pre-sea floor spreading period.

Sometimes the response to such issues is to characterise the area as high risk but it is a demonstrable fact that when explorers describe basins or prospects as high risk, they are actually indicating either that they recognise some fundamental problem with their petroleum geology - a loose end which is the reason why the basin/prospects will not work - or that they do not believe the hydrocarbon volumes that they have attributed to the basin as a whole and/or to the prospects.

Is there anything that can be done about this?

Well, over the last 10-15 years the global industry has learned that there is much more that can be done with seismic, especially 3D seismic, above and beyond plain old structural mapping. Successful prediction of stratigraphy, facies and lithology has become the norm, and the direct detection of trapped hydrocarbons from seismic data, long a holy grail of explorers, has come close to perfection in for example deep water Angola where ExxonMobil, Total and BP have enjoyed a better than 90 per cent exploration success rate. These Majors have tried very hard, and managed, to keep their in-house techniques confidential with regard to many smaller oil & gas companies and most geophysical contractors.

Normally the problem for the interested onlooker is that seismic data is held tight within the partner companies. However, in the case of the Falklands, seeking inward investment, the interested parties have all published some seismic data in the hope of generating some excitement about the scale of their prospects. The result is that in total there is enough available for the experienced eye to take a reasonable view of what might be seen. And I must say that my sense of pessimism about the prospectivity of the Falklands has increased after looking at this data - there seems little evidence on the seismic of either improvements in reservoir or trapped hydrocarbons, at least not in the plays described by the current licence holders.

Of course, given the current global scramble for oil, its probably inevitable that there will be further drilling in the Falklands. The 1998 campaign involved an innovative rig-sharing agreement to enable the six wells to get drilled and perhaps the current operators will try something similar to drill say six to eight wells that test the envisaged plays; at current day rates for a deep sea drilling vessel, one can imagine a gross cost in excess of US$250 million.

For those with pens poised over cheque books, I offer the insightful words of one Samuel Smiles: We often discover what will do, by finding out what will not do; and probably he who never made a mistake never made a discovery.

______________________________________________________________________________

David Bamford is 58. With a Ph.D in Geological Sciences from the University of Birmingham, he had over 23 years exploration experience with BP where he was Chief Geophysicist from 1990 to 1995, General Manager for West Africa from 1995 to 1998, and acted as Vice President, Exploration, directing BP's global exploration programme, from 2001 to 2003. He retired from BP in 2003 and now is a non-executive Director of Tullow Oil plc, and of Paras Limited, a specialist oil and gas industry consulting firm, and Visiting Professor of Geophysics at the University of Leicester.

Contact: bamford_windward@hotmail.com

Desire's 25m goes nowhere in this cost scenario. It's easy to see why it is getting cold shouldered and no institutions are interested. I got rid of my shares a while back and am pleased I did.

I think your right coeliac1 Desire needs a some sort of partner with the price of renting out equipment soaring and the lack of availability its the companys with the most cash who wins not the minos

Professors?
I recall a prof.when I was at Uni in the 60`s calling me stupid when I suggested that the North Sea petrology had a similar look to some oil bearing strata , somewhere else in the world, can`t remember where-it might have been Libya.
How do experts!!!

I think David Bamford does not have a clue what he talking about as he wont have seen Desire Data and should not make assumption on it!

I trust the BGS and what conclusion they have come up with and other various geologist who have studied the basin in depth and not from a picture in a book.

5 out of 6 holes drilled last time had oil shows one had live oil on the logging tool and in the mud pits which I believe would indicate that there is a working hydrocarbon system in the North Falkland Basin.

Reading Desire Petroleums various presentations and trying to get behind them to what is being said about the rocks, its difficult to be sure that their technical advisers actually believe that there is a working hydrocarbon system in the North Falkland Basin, the further drilling of which will lead to discoveries

Marky, I hope you're right and Bamford isn't aware that we previously had hydrocarbon shows on 5 out of 6 holes and hasn't looked at the seismic carefully but it is getting strange that no deals are being struck. I suspect that it is Phipps reluctance to lose more than say 50% of the future production that is preventing a deal. Given the low probability of getting a rig at the moment even with Peaks help I hope the board is noticing other deals struck with majors in frontier zones like this weeks Exxon / PVR offshore Ireland deal where the major walks off with 80% but has to do all the work. Desire already has 3D so a 60/40% split like DNOs north sea farm-in would be a reasonable compromise. This has to be the best time for years to achieve a good farm-in deal, come on board members telephone Exxon and tell them they shouldn't have to struggle in such deep waters off Ireland when the Falklands beckons.

Hi Lucky,

Bamford didnt even know what the water depths were, if you going to write about a company you should know what youre writing about or you look an idiot.

The Desire board have never talked this share up not like FOGL and are time will come its just a bit frustrating at times and am sure if a deal is done it will be a good deal on good terms so I will stay optimistic on that front.

Interesting a 200K and a 250K buy just happened. It looks like Desire is not going to test it's lows after all.

Marky, I didn't realise that Bamford was once such a key figure at BP. He seems to be laying his cards on the table, I wonder what prompted his need to give his views on the Falklands. Could be good for us long suffering Desire shareholders.

Hi Lucky,

Hope you check your mail.Good to see the large buys when you get mail it might make you wonder why.

A rather long article and slightly rambley Imho. snip below, but read the full article.

http://www.falklandnews.com/public/story.cfm?get=3794&source=3

Mrs. Rendell gave a brief report about the Area of Co-operation. When the bottom fell out of the oil price meetings ceased but it is thought that with the increase in activity in the North and South Falkland Basins that talks with Argentine officials about the special area of co-operation could begin again.

A presentation by Desire Petroleum about the EIA will take place on 22 February 2006 at the Chamber of Commerce and Rockhopper Petroleum is using the Geo Pacific for 2D Surveys in the in the North Falkland Basin. FOGL have used GSI Admiral in the South Falkland Basin for the same reason, with 3D Seismic shortly to identify prospects for drilling. Rockhoppers OHM Survey with the GSI Pacific is soon to commence and FOGl has completed all but 3,000 sq km of their 25,000 sq km survey area in the South Falkland Basin.

In the future, Desire Petroleum plan to get a rig to do exploratory Drilling in their tranches as soon as possible. Vessels will do 3D surveys in both the North and South Falkland Basins. Seeing that there will be minimal impact on land, drill ships will be used to pump and store crude for on forwarding to markets on tankers. FPSOs as they are called, would, in future, have the facilities to liquefy natural gas into diesel for on forwarding to markets.

Former Governor, Mr. David Tatham, asked if natural gas could now be processed onboard FPSOs and Colin Phipps said not yet but research and development in that area is nearly complete and the facility for liquefying gas should be available on them in the not so distant future. Cllr. Clausen added that in Norway Natural gas is liquefied on barges and transported to market with no environmental impact.

Looks like it was vey professional.

http://www.falklandnews.com/public/story.cfm?get=3799&source=3

Dr Colin Phipps, Chairman of Desire Petroleum plc, is visiting the Falkland Islands with Mr. Ian Duncan, Chief Executive of Desire Petroleum plc, Mr. John Perry, principle author of the Environmental Impact Assessment and Mr. Mark Gillard, a Drilling Engineer. On the evening of Wednesday, 22 February the team gave a presentation at the Chamber of Commerce and explained the main points of the Environmental Impact Assessment, which is on Desire plcs website.

Mr. Gillard said that Desire planned to drill three exploratory wells and he showed graphics that indicated how the wells would be drilled and how deep they would be. He said the project would take approximately 70 days, with supplies and personnel being ferried out to the rig using two supply boats. One boat would stay near the rig for Safety reasons.

Mr. John Perry of RPS Energy presented a very thorough set of slides that explained some of the impact issues, such as rig to air pollution, rig to water pollution, noise pollution. Assessments were also done with respect to seabirds, Marine Mammals and fish. The key points of the baseline study also dealt with Met-Ocean, Socio-economic issues, land and protected areas and species, as well as waste management. There would be no flaring, for example.

In mitigation, the assessment sought to reduce the impact to the environment to the lowest possible level.

Questions from those present dealt mainly with the drilling muds that are a necessity in the hydrocarbons industry. Mr. Perry reassured that only water-based non toxic muds would be used.

Several mechanisms have been in place since the 1997/98 drilling sessions in the North Falkland Basin. As in the past, EMS Standard Offshore Monitoring Protocol would be in place to ensure the environmental and safety aspects pointed out in the Environmental Impact Assessment would be carried out. Besides that, people with a keen interest in the environment pilots, scientists, fishermen you and I would be reporting any infringements.

The possibility of a users group was thought to be a good idea. Dr. Phipps said that since the Environmental Impact Assessment was published on the Desire website there had been some useful feedback that would be incorporated in methods and practices.

Read the article not just the headline!!

http://www.falklandnews.com/public/story.cfm?get=3798&source=3

Just a snip from the article.

CP: Last night I was asked, What were the chances of finding oil? And, I said the chances of finding oil, as such, were almost 100% because the Shell well, for instance, already found oil and it found gas. And, had it been onshore, say in the USA, it almost certainly would have been put on to production. It was good enough for that. The trouble was that it was drilled in the centre of the basin and it only entered thin, silted type sand, which means its got very small grains. And, the small grains mean that although it could be quite porous, its very difficult for oil to flow through it. There is more friction, if you like to think of it that way. The coarser the pours, the faster it flows. What we are really trying to do now is to find a reservoir of coarser sand, where the oil can flow through more easily. So rather than being able to produce 500 barrels a day, we are going to be able to produce 5,000 barrels a day. And, thats what we need to do out in the North Falkland Basin for it to be economical. Our big task is not so much finding oil, which we know to be there. What we are now trying to do is to find the reservoirs, which will give us the productivity, which will make it economic.

Looks good to me Caps!!

http://www.falklandnews.com/public/story.cfm?get=3798&source=3

Falklands : "Have Rig Will Drill," Says Dr. Phipps

http://www.sartma.com/art_2646.html

Not quite the right headline! Indeed he didn't say that at all he said

"if we get a rig we will drill"

Which is common sense.

coeliac1,

If we get a rig there would be an RNS which there has not been!

All i have done is copyed the title of the headline from story.

Well could we of hit the peak or is it a blip!!!

US rig count slips

By Upstream staff


The number of rigs searching for oil and gas in the US fell by two to 1543 for the week ended 24 February, according to energy services firm Baker Hughes.

During the same week last year, there were 1281.

The state of Texas lost five rigs and was operating 686 by the end of the week. The number of rigs in Oklahoma rose one to 174.

The number of rigs in the US Gulf of Mexico rose six to 84, compared with 99 last year.

The total North American rig count fell 21 to 2242, while last year it was 1898.

Canadian rigs fell 19 to 699, compared to 617 last year.

For more details and international rig count figures, please see "related links".

Just had a look at the map of RKH's seismic.

There target J1 seems to have take quite a pounding from the seismic guns.
Lots of closely spaced lines and overlapping Des's block as well.
It should be possible to get a 3D interpretation from the new data when combined with the old DES data over that particular target in my view.

If he CSEM results are positive, then surely they will consider drilling it if a rig is in the area.

Lots of big "ifs" Capn.

If there is no rig then by the end of this year? then RKH will be able to cancel the farm in deal with Des. The way things are going I think there is every chance they will do that as rigs are not on the horizon.

Coeliac

9 months is a long time and a lot can happen with in that time frame and RKH I would think are very happy with there 7,5% stake and are fully committed and focused on what works has to be done.

Why do you think they would cancal there farm in deal?