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

http://www.oilbarrel.com/news/article.html?body=1&key=oilbarrel_en:1185847528&feed=oilbarrel

31.07.2007
Rockhopper Encouraged By Latest Technical Work On Its Falkland Acreage While FOGL Excites With News Of Possible Farm-In
Things may, at last, be starting to heat up down in the Falkland Islands. After a year of not-much-happening (a couple of years back there were hopes wells would have been sunk by now), there are signs that the Falkland Island explorers are making slow but definite progress on putting together a drilling programme in these remote waters of the southern Atlantic.

Rockhopper Exploration, which focuses on the North Falkland Basin where it has interests in six licences, attracted a flurry of investor attention last week when it provided new resource estimates for the eleven best prospects in licences PL023 and PL024, suggesting total unrisked P50 recoverable reserves of 2.5 billion barrels. Shares in the AIM company, which is named after the local penguin colonies, jumped 5.5p to 52.5p after the release of the new numbers.

These licences lie close to the Falkland Islands and in relatively shallow water depths (less than 200 metres), reducing the minimum economic threshold for discoveries to 35 to 50 million barrels of recoverable oil. The company believes that the net present value of a single 100 million barrel recoverable oil field would be between US$750 million and US$1 billion.

The prospects, named after local place names, carry unrisked P50 recoverable estimates that range from 44 million barrels on the Concordia structure to 580 million barrels in the Keppel prospect. None of the eleven include the stratigraphic leads, which can be difficult to identify on seismic data and will require further data acquisition to mature to prospect status.

The most attractive of the eleven prospects is reckoned to be Ernest, with a P50 estimate of 130 million barrels. Ernest is a four-way closure that has been derisked by matching the 3D data with a CSEM anomaly: it carries a 40 per cent chance of success.

The company has also reviewed the 800 sq km of 3D data acquired over licences PL032 and PL033 to the north. These are ex-Shell licences that yielded live oil back in 1998 when the first and last wells were drilled in the North Falkland Basin (only six in total for an area half the size of Texas). The 3D shoot included a 30 km stretch of the previously untested eastern margin of the basin. This is significant because Rockhoppers geological model is based on the assumption that oil in the basin migrated to the basin margins, thereby explaining why the 1998 drilling campaign proved disappointing: all six of the 1998 wells focused on the centre of the basin where a regional seal is believed to have prevented the upward migration of oil.

Preliminary interpretation of the new 3D data is promising, revealing a number of structural closures and two large fan bodies. Oil has already been recovered on licences PL032 and PL033 so the fact that we can see structural closures and possible fans on our 3D seismic in this area is highly significant and increases our confidence in the prospectivity of the acreage, said chairman Pierre Jungels.

All of this, of course, remains purely speculative until tested by the drillbit. The companies exploring these waters need to either pool resources to secure rig time or bring in farm-in partners with the deep pockets to finance these kinds of wildcatting projects. There are signs that the tight rig market is easing somewhat but it is still going to be expensive to drill in these remote waters.

The partners are doing what they can to inch towards drilling, collecting data in order to de-risk their prospect inventories and taking the necessary logistical steps to have drill-ready projects. Millions of dollars have been spent on 2D, 3D and CSEM surveys. Desire Petroleum, which like Rockhopper is active in the North Falkland Basin, has been stockpiling drilling equipment and is in the process of conducting a high res 2D seismic site survey over its Ann, Dawn and Ruth prospects in order to identify any potential hazards that could affect the surface location of the wellbore.

And both Desire and Rockhopper are conducting Environmental Impact Assessments over their licences. A successfully completed EIA also enhances the marketability of the acreage to prospective farm-in partners. The more work done to de-risk the acreage and present a drill-ready portfolio of prospects the more value the AIM players will be able to extract during farm-in negotiations.

No deals have yet been struck but last week investors got the first real signal that a major oil company may be getting reading to join the AIM explorers. Falkland Oil & Gas Limited, which is focused on the virgin waters to the south and east of the islands, confirmed it is in advanced discussions which may or may not lead to a major resources company farming in to certain of its assets.

This is big news. FOGL opened its data room well over a year ago but despite reports of interest from all the usual suspects, a deal has been slow to materialize (not least because of the vast amounts of data to digest by risk-averse oil majors). Shares in AIM-quoted FOGL shot up by 42 pence to 123 pence on news of the talks, taking its share price up 55 per cent week-on-week. The shares have since eased back to 114 pence but are still more than 30 pence higher than in early June. Investors will be keen for those advanced discussions to firm into a concrete deal that brings the prospect of drilling a very real step closer.

http://www.sartma.com/art_4483.html

The oil exploration industry in the Falklands are expecting good news about an oil rig soon, with all companies keeping cards close to their chests, in hopes to bring the first rig to the Falklands sometime in 2008. Some uncertain sources say it could be at the end of 2007. We wait and see.

Rig group required for Falklands

http://www.offshore247.com/news/article.asp?Id=8599


Rig group required for Falklands

Thursday, September 6, 2007


Drilling in the South Atlantic Falklands will still take some work from the operators holding licences there before a rig consortium can be formed to drill, an offshore service group has suggested.

With the worldwide rig market remaining tight a rig expert from AGR Petroleum Services has suggested that Falklands exploration companies with licences both in the north and south of the Falklands will have to compromise if they want to get identified prospects drilled.

One of the big barriers is the fact that rig owners are seeking a minimum 12 months contract for a drilling unit before they are prepared to commit to a region.

There is a group of Falkland Islands operators and they recognise they have to work together, said Ian Burdis, division manager of AGR Petroleum Services.

I have a feeling we are getting close, he commented, when asked about the prospects for putting a rig consortium together for Falklands drilling.

One of the challenges for the region is the differing rig requirements for the operators: Licences to the north of the islands are in shallower water which does not require a high specification unit, but the area to the south of the islands is a much harsher, deepwater environment which will demand a high specification rig.

Drilling last took place in the Falklands in 1998 with a rig-sharing consortium which drilled six wells.

I think they will have to take a deepwater rig and some commercial arrangement will have to take place between the operators, Burdis speculated.

The deepwater operators are going to have to compensate the others, but they will have to pay more than they want to, he suggested.

He said there is no deepwater rig capacity available for 2008. We have expressions of interest from 27 different companies with an aggregate of 2.5 rig years and I have an offer on a fifth generation rig for a minimum of two years, he said, detailing AGRs current negotiations with rig contractors. And those operators are in West Africa, Australia, Calgary, London, Paris and Moscow, Burdis told an industry briefing at Offshore Europe in Aberdeen.

The hard part is transforming all those expressions of interests into form commitments before someone like Exxon Mobil or Statoil takes the rig.

On the chances of forming a rig consortium for the Falklands, he continued: It is technically possible .this is worth the effort but it requires an awful lot of work on our part to pull it together.
Thursday, September 6, 2007

http://news.independent.co.uk/business/analysis_and_features/article2970876.ece

Small Talk: BHP in the frame to take Falklands stake
By Andrew Dewson
Published: 17 September 2007
Companies have been prospecting for natural resources in the vicinity of the Falkland Islands for what seems like an eternity, and so far at least the results have been about as tempting as a winter holiday at Goose Green. However, some well-informed corners of the City believe that the situation is about to change radically for at least two regional players.

The word is that Falklands Oil & Gas is poised to confirm that it has agreed a "farming-in" deal with the world's largest integrated mining group, BHP Billiton. Farming-in occurs when an exploration and production company invites a partner to share in the development and funding of a prospect.

The company has already confirmed that it is deep in negotiations with several potential blue-chip partners about a farming-in arrangement, and as a result the shares have rocketed from below 75p to Friday's closing 157p over the past two months. However, a deal with as prestigious a partner as BHP should see even more punters pile into the shares.

Although best-known as a mining stock, BHP has extensive oil interests, and expects several of its prospects to come into production over the nextsix months.

Many observers have been highly sceptical about the prospects for significant and more importantly economically viable finds in the South Atlantic. Not only is the environment one of the least hospitable anywhere in the world, requiring deep sea rigs capable of working in the roughest seas, the Falklands is a long way from any major oil market. But with black gold hovering at close to all-time highs, in absolute terms at least, perhaps now majors are set to take the region more seriously.

Elsewhere in the Falklands, recent newsflow has not been so good. Falklands Gold & Minerals confirmed that its drilling programme has failed to find commercial quantities of gold at Bluff Cove. The company still has 3.5m of cash, and the rumour is that it is considering a move even further south into Antarctica, to be precise. How many geologists will be queuing up for a slice of the action is hard to tell there is no shortage of demand for qualified geologists, and most locations don't require living life in the freezer.

http://www.falklandnews.com/public/story.cfm?get=4673&source=3

LOCAL DEVELOPMENTS:



There is a positive buzz in the Falklands and the visit of Oil Company representatives is seen as a very important event for Falklands businesses. The representatives will be giving presentations at the Chamber of Commerce and there will be an opportunity to chat with them about a variety of options. It is expected that the Falklands will see an exploration rig sooner rather than later.

http://www.sartma.com/art.php?artid=4537&skip=1

Falklands Await Joint Oil Operators Meeting


By J. Brock (FINN)


A joint Oil Operators meeting will be held in the Falklands between Saturday 29 September and Saturday 6 October 2007


Participants attending are: from Desire Petroleum, Dr. Colin Phipps Chairman, Dr. Ian Duncan Chief Executive Officer, Mr. Stephen Phipps Non Executive Director, from Mr. Lewis Clifton OBE Non Executive Director, from Rockhopper Exploration, Mr. Sam Moody Managing Director, Mr. Dave Bodecott Exploration Manager, from Argos Resources, Mr. John Hogan Chief Executive, Mr. Drew Irvine Director, from Falkland Oil & Gas Ltd, Mr. Tim Bushell Chief Executive Officer, Mr. Stephen Luxton Resident Representative, from Borders & Southern Petroleum, Dr. Howard Obee Chief Executive Officer, Mr. Bruce Farrer Business Development Manager, from British Geological Survey, Dr. Phil Richards FIG Offshore Consultant, from RPS Energy, Mr. Jon Perry Environmental Manager, from FIG, Mrs. Phyl Rendell Director of Minerals & Agriculture, Cllr. Andrea Clausen plus others as appropriate


On Saturday 29 September, the oil reps will arrive via Lan and transported to Stanley. The programme begins on Sunday 30 September, when the group will participate in an organised field trip. Another organised field trip will take place on Monday. From 8.00am-5.00pm on Tuesday the oil reps will have individual Company meetings with FIG. The big event on Wednesday 3 October from 8.30am-5.00pm is a Joint Oil Operators & Government Officials Meeting. A Briefing at MPA is scheduled for Thursday 4 October between 10.30am-1.00pm. From 2.00-4.00pm Individual Company meetings with FIG as required will be held and from 5.00-6.00pm there will be a Public Meeting in Court & Council Chambers



Friday 5 October will be a very busy day with a 9.00-10.30am Operators briefing with Councillors. Then from 10.30am-12.00 there will be another briefing with Heads of FIG Departments meeting with OperatorsFrom12.00-1.30pm there will be a Q & A Session followed by lunch at Chamber of Commerce. Then from 2.00-2.50pm Dr. Ian Duncan & Mr Jon Perry to talk to Community School children Years 10 & 11, followed by 2.30-3.30pm when Dr. Phil Richards to talk to Infant/Junior School children Year 5 & 6. From 3.30-4.30pm Operators will be meeting with Falklands Conservation.



After a very busy week, the Oil Company reps will depart the Islands via the weekly Lan Flight.

Britain said to lay claim to south Atlantic seabed


LONDON (AFP) Britain is seeking to legally annex stretches of the south Atlantic seabed in a bid to tap gas, mineral and oil wealth, in a move that could raise tension with Argentina, a newspaper reported Saturday.

It plans to file with the United Nations authorities a claim to tens of thousands of square miles of the Atlantic Ocean floor around the Falklands, Ascension Island and Rockall, The Guardian said.

In a bloody war 25 years ago, British forces expelled Argentine invasion forces from the Falkland Islands, which is 8,000 miles (13,000 kilometres) from Britain. Argentina claims the Falklands, or Malvinas, as their own.

The British government is trying to speed up the application process with the UN Commission on the Limits of the Continental Shelf (UNCLCS) ahead of an international deadline in May 2009, the newspaper said.

In a novel legal approach, any state can use detailed geological and geophysical surveys to demarcate a new "continental shelf outer limit" that can extend up to the 350 miles from its shoreline, The Guardian said.

The British government has collected data for most of what it is submitting, it added.

Chris Carleton, head of the law of the sea division at the UK Hydrographic Office, said preliminary talks on Rockall are due to be held next week in Reykjavik, the capital of Iceland, according to the newspaper.

The Falklands claim has the greatest potential for diplomatic tension, Carleton said.

Britain has been granted licences for exploratory drilling around the islands within the normal 200-mile exploration limit and any new claim to UNCLCS would extend territorial rights further into the Atlantic.

"It would be beyond the 200-mile limit but less than 350 miles," said Carleton, who is involved in preparing the submission.

"It effectively joins up the area around South Georgia to the Falklands. It's a claim but how it's handled has not been decided yet. The Argentinians will say it's not ours to claim. It's all a bit tricky," he was quoted as saying.

http://www.oilport.net/news/article.asp?Id=8783

Rig share offered

Friday, September 28, 2007



Falkland Islands exploration company boss Howard Obee has clearly stated that his company is willing to work with other firms operating there to develop a joint drilling campaign.

Obee, chief executive of Borders and Southern Petroleum, which just recently hired PGS for a 1,500 sq. km 3D seismic survey campaign over its licences to the south of the Falklands, says his company is preparing an environmental impact statement in preparation for drilling, and indicated his willingness to share a rig.

With respect to accessing drilling rigs, it is the companys intention to participate in any joint drilling activity with the other Falkland Island operating companies and we will continue to work with these companies to progress this, Obee said.

Rockhopper Exploration and Desire Petroleum are currently working their own prospects for possible drilling off the Falkland Islands.

Obee went on to state: The next 12 months will be an exciting time for the company as we get greater clarity on the value of our acreage and prepare the groundwork for the drilling phase.

Previously, Borders and Southern has indicated that it has identified a number of high-graded leads on its acreage, some of which encompass areas of more than 50 sq. km (20 sq. miles).

Borders and Southern expects PGS to start its 3D South Falklands survey next month.

Today the company reported its interim results for the first half of the year, and disclosed a 362,015 loss on operations for the six months to June, similar to the 361,22 loss reported for the first half last year. Losses on ordinary activity after tax were 117,158, for the first half of 2007, down from 182,010 last year. Friday, September 28, 2007

http://www.tradingmarkets.com/.site/news/Stock%20News/662251/

Falkland Oil to Drill Two Wells in BHP Billiton Pact (Update1)

By Tom Cahill

Oct. 2 (Bloomberg) -- Falkland Oil and Gas Ltd. plans to drill at least two exploration wells off the Falkland Islands in an agreement with BHP Billiton Ltd., the largest mining company.

BHP Billiton will acquire at least a 40 percent interest in two of Falkland's licenses with an option to increase its stake to 65 percent by agreeing to help finance the drilling program.

While the British Geological Service estimates that as many as 60 billion barrels of oil may be generated in the North Falkland Basin, exploration has been limited because of a lack of drilling rigs. Desire Petroleum Plc, another explorer in the Falklands, proposed a consortium to lure rigs to the remote islands, which the U.K. kept after a war in 1982 with Argentina.

``This finally cracks the rig problem,'' Tim Bushell, chief executive of Falkland Islands Oil and Gas, said in a telephone interview from the Falklands. ``It's a huge game changer for us and possibly the other guys as well. We were just not big enough to attract a rig and BHP has the scale and size to bring them in.''

BHP has two drilling rigs already on long-term contracts that it could choose to use, Bushell said. He estimated costs for drilling wells in waters about 1,000 meters deep could cost as much as $35 million per well, not counting the transport cost to get a drill ship on site.

Bushell said its ``top ten'' prospects in the region all have at least 500 million barrels of reserves with the largest estimated at 3 billion barrels.

Under terms of the agreement, BHP would cover 53.3 percent of those costs for a 40 percent stake and as much as 86.5 percent if it exercises its option for a 65 percent stake.

http://www.mercopress.com/vernoticia.do?id=11505&formato=HTML


Desire Petroleum optimistc about oil rig availability
Speaking to local shareholders in Desire Petroleum plc at a meeting in Stanley on Monday evening, Chairman Dr Colin Phipps said that he was more optimistic than he had been for a long time about the companys prospects of finding oil in commercial quantities in the North Falkland Basin.



High oil prices since the last Falklands drilling campaign in 1998 had led to a global concentration on production and an associated increased demand for oil platforms, which had limited rig availability and pushed daily rates out of the reach of exploration companies like Desire.



Dr Phipps said that increased rig production in response to demand and a tendency for rig producers to tie oil companies to long contracts, which in some cases they could not fulfil, seemed to have led to an increase in rig availability in the last six months, with the expectation also that daily rates, currently as high as $US 450,000, would fall significantly.

While the wait to begin drilling had been frustrating for the company, Dr Phipps assured the thirty or so shareholders present that the time had not been wasted. Much additional geological and geophysical work had been done on the licensed areas, which had resulted in the identification of more drilling prospects and a significant de-risking of several of its existing prospects.

Interest in Desires licences continues to be shown by potential partners, said Dr Phipps, but the Board did not discount the possibility of drilling independently if a rig should become available which was fundable from the companys own resources. In either case, Desire would go into a drilling campaign better prepared than ever before.

Colin Phipps, accompanied by fellow directors, Ian Duncan and Stephen Phipps, is in the Falklands for a meeting of the Falklands Joint Operators Group. This group, which is made up of representatives of all the companies currently involved in exploration for hydrocarbons in the waters around the Falkland Islands, usually meets in London every two or three months. The meeting in the Falklands is the first to have taken place for several years.

http://business.timesonline.co.uk/tol/business/industry_sectors/natural_resources/article2577806.ece

They are suggesting drilling will take place with in a Year!
I think we shall here news on the Desire front in the very near future of possible farm -in partners.

October 3, 2007

BHP Billiton strikes $100m Falklands drilling deal

BHP Billiton is dipping its toe into disputed waters with an agreement to fund a drilling programme offshore in the Falkland Islands.

The Anglo-Australian resources group is joining forces with Falkland Oil and Gas, an AIM-listed company with rights over exploration acreage south of the islands. BHP will fund the majority of a drilling programme of between two and four wells at a cost of $100 million (49 million).

Tim Bushell, chief executive of Falkland Oil and Gas, said: The introduction of a major company as a farm-in partner has been a key strategic objective over the last 18 months.

Floated on AIM three years ago, Falkland Oil and Gas has conducted extensive seismic surveys over offshore acreage that it secured in a 2002 licensing round.

Mr Bushell said that the company had identified large prospects, but added that it needed financial backing to drill in water 3,000ft deep. Its not cheap to drill and, with high oil prices affecting the price of rigs, its even more difficult, he said.

BHP is acquiring 40 per cent of the licences with an option to increase to 65 per cent for an initial payment of $10 million, which will reimburse initial costs incurred by Falklands Oil and Gas.

BHP will not only provide funds but will also take over the operation of the exploration programme and has access to rigs, a key advantage in a market where equipment is in short supply. The first well is likely to be drilled in a years time.

The BHP initiative is the first sign of renewed commitment to Falklands exploration since the disappointing round of investments in the late 1990s when Shell, Amerada Hess and Lasmo acquired offshore licences in territory north of the islands. Six wells were drilled, with some hydrocarbon finds, but none of the discoveries were of a scale to justify investment in production platforms in depths of 1,000ft.

The isolation of the Falklands and the lack of any infrastructure mean that discoveries would need to be of massive scale to justify investment. Moreover, a gas discovery would pose additional problems as the nearest market would be Argentina, which still claims sovereignty over the Falklands.

http://www.mercopress.com/vernoticia.do?id=11516&formato=HTML

Argentina announces discouragement letter to BHP Billinton

A little to late for the Argeis now i think they have run out of time,all huff and no puff.

http://www.sartma.com/art_4586.html

Falklands : BHP Spin-Off Could be Good for Desire
Submitted by Falkland Islands News Network (Juanita Brock) 03.10.2007 (Current Article)
Now that BHP are a farm-in partner of FOGL the spin-off could benefit other exploration companies to find suitable rigs for exploration.


BHP SPIN-OFF COULD BE GOOD FOR DESIRE

By J. Brock (FINN)

On Monday 01 October 2007 Desire Petroleum held a shareholders meeting at the Falkland Islands Chamber of Commerce Function Room. About a dozen shareholders made the meeting on Peat Cutting Monday and heard some very encouraging news from Dr. Colin Phipps and Mr Ian Duncan about the prospects in their tranches in the North Falklands Basin. To say that the next 12 months are going to be exciting is putting it mildly. FINN has interviewed Dr. Phipps about the way forward for his company and the industry in the Falklands in general. He was asked first about rig availability.

CP: Today you would have had the announcement from Falkland Oil and Gas that they have done a farm-out deal with BHP. The deal states that BHP will drill 2 wells in the next three years. Now, BHP has two rigs which are now in the American Gulf Coast. It may be that they will bring one of them down to drill here in the South Atlantic. But they havent said when they will.

And, its not certain that the rigs that they have in the Gulf Coast are going to be suitable, anyway, for drilling in the South and East Falklands Basins. So, I think as far as the rig situation is concerned, we are all of us still going to be looking and the probability is that BHP will now join with us in that search. Two alternatives are that BHP bring a rig down that the rest of us use or they join with us in getting a rig.

The difficulty at the moment with rig availability is that all of the rigs are contracted for a long time. But its beginning to look as if some of the companies that have taken long-term contracts dont really have enough oil to fill up the length of contract so there is spare capacity. And also, and it is perhaps more important, a large number of new rigs are becoming available as they come off the shipyards. So, there are going to be a lot more rigs.

It may be a fairly slow process but I think that the additional rigs that are coming on to the market the prices will start to dip and rig availability will become better. So, right at the moment it is probably looking better for getting a rig than it has done for quite some time. And what BHP is doing is clearly going to be a catalyst in helping that to happen.


FINN: There have been a few speculative articles about Borders and Southern and working with the rest of the exploration companies. From what I can understand from them, their waters are too deep for even an enhanced rig. Is this still the case? Have rigs been advanced enough?


CP: They have a deep water rig that could drill there quite successfully. There are plenty of deep water rigs that can drill there. These are rigs that are either ships or dynamically positioned drilling rigs which means they dont need anchors. They stay on station because they have a multitude of thrusters working all the time to keep them on a single spot. These thrusters are very expensive pieces of machinery and the fuel costs are very high if the weather is particularly bad to keep them on station you use a lot more fuel for the thrusters. But there are certainly rigs available that will meet those requirements. You may check this out but we certainly have spoken with all the other companies about going forward and these are certainly one of the options.



FINN: Are dynamically positioned rigs and drill ships the same thing?


CP: A drill ship is often dynamically positioned in fact they always have done it but it is ship shaped. The advantage of that is it can go from one location to another as fast as a ship can so it cuts down the transit time. And cost per day is high.



A drilling rig dynamically positioned is not shaped like a ship. It can also move under its own steam but it cant move quite as fast as a ship shaped rig.


FINN: I am curious about the amount of oil you say you have. Is it just in one prospect the 2.3 billion barrels or is it in all of them?


Its in all of the prospects on the tranches C and D. There is additional prospectivity in Tranches I and L. that would add to that. Besides, these are prospective. They have yet to be discovered. And, of course, it may be that they are not there but we would certainly hope equally that it could be more.


FINN: Indications I get from the South American Press are that the larger companies are pulling out of Latin America and selling their assets. Do you think that you might be seeing them here in the Falklands?


CP: Well, its possible, I mean it would certainly take away some of the embarrassment of companies likes Shell and ESSO being involved in Argentina and therefore it might be easier to come to the Falklands. I am not sure to what extent the politics here have kept out some of the larger companies but I think it must have had influence. They have large investments in places like Argentina relatively large, anyway. It would, I think, have an affect on their view of the Falklands. If they moved out of Argentina and I think Shell has already pulled out their assets in Argentina and I understand ESSO is going to do the same. Not merely in Argentina but through Latin America Venezuela and Bolivia and Ecuador. They are all very nervous that they are going to see the old-fashioned type of dictatorships beginning to emerge again in South America with presidents giving themselves much more than one or two terms and others becoming extremely nationalistic. Nationalism in the left wing and the right wing there has equally been right and left wing nationalism expropriation the sort of thing you have been seeing in Venezuela and Bolivia. And, the companies are very reluctant to invest more. And if you are not going to invest more the appropriate thing is to disinvest.

It could help here but so far its early days.


FINN: How are you going to deal with the fact that Argentina might demand that a company working in their country should not work in the oil industry here?


BHP, for instance, which has just become a partner of FOGL have no interests in Argentina but have major interests in Chile one of the biggest mining companies in Chile, so they are not going to worry about Argentine politics and I suspect that others that come in will be in a similar position.


FINN: Your share prices, hovering between 28.00 and 32.00 could go higher. Are you satisfied with the price?


I am never satisfied with the share price but in the final analysis its the success that we achieve that will determine what the share price will become and there are a number of steps towards that. That will be reflected one way or another in the share price. Once we start drilling that will influence the price. If we are successful it will be great. The current price is reflecting the cash position of the company and some of its future potential. Shareholders and the market are really waiting to see if we get a rig and at that stage I think the market will become more active.


FINN would like to thank Dr. Phipps for taking the time to do this interview.

http://www.falkland-malvinas.com/vernoticia.do?id=11523&formato=HTML

Australias Billiton shrugs off Argentine legal actions threats
Resources giant BHP Billiton appears to have shrugged off the threat of legal sanctions by Argentina following the decision to acquire oil and gas exploration acreage off the disputed Falkland Islands according to reports in the Australian press
Argentina has condemned the deal and plans to write to BHP to say it faces bans in Argentina if it moves to explore under the newly acquired British exploration licenses.

Earlier this year Argentina scrapped a Falkland Islands oil exploration accord with Britain, blaming Britain for unilaterally calling for tenders on oil exploration in the area. Argentina is now insisting that the long dispute over sovereignty of the islands be resolved before any oil deals are done.

BHP ducked the controversy to focus on the prospects for finding oil.

"We are very excited about this opportunity and we think it has good potential. It isn't appropriate for BHP Billiton to discuss the topic of sovereignty" said a BHP spokeswoman.

BHP has no significant assets in Argentina, having sold its stake in the Alumbrera copper and gold mine in 2003.

A spokesman for the Australian Department of Foreign Affairs and Trade said any decision by BHP to explore off the Falkland Islands was a matter for BHP. "It would be a commercial decision and (BHP) would need to weigh up the likely responses of the principals involved," the spokesman said.

However he said Australia was encouraging Argentina and Britain to resolve the issue of sovereignty through bilateral talks, or through the United Nations if required.

BHP's decision to explore so far south is the latest sign that the global hunt for oil and gas reserves is becoming more desperate. BHP's exploration venture off the Falklands will not only see it braving potential Argentine sanctions, but also high seas, freezing conditions and even the odd iceberg.

By funding exploration costs over the next three years, including the drilling of at least two exploration wells, BHP will earn 40% of UK-based Falkland Oil & Gas Ltd's exploration licences off the Falklands. BHP also has an option to earn a stake of up to 65% in the prospects. Upfront, BHP has agreed to pay FOGL 10 million US dollars to cover historical costs. BHP will take over operational control of the licences from the start of next year.

The FOGL licences cover nearly 73,000 square kilometers to the east and south of the Falkland Islands. But BHP's drillers will have to battle difficult weather conditions to operate in water more than a kilometer deep. Drilling will also be expensive, given the remote location and lack of infrastructure.

Given the tiny size of the Falkland Islands, with only 2000 inhabitants, BHP is expected to have to rely on its production hubs in the Gulf of Mexico and Australia to provide operational support and expertise.

Falklands Says Exploration `Inevitable' Given Record Prices
By Tom Cahill
Oct. 4 (Bloomberg) -- BHP Billiton Ltd.'s decision to drill
at least two exploration wells in the Falkland Islands was
``inevitable'' as record oil prices reinvigorate interest in one
of the world's least explored oil provinces.
``With the price of oil where it is, it's inevitable that
the oil majors will look at the Falklands,'' Phyl Rendell, the
Falkland government's director of mineral resources, said in a
telephone interview today from Stanley, the islands' capital.
``We need some large companies to make it happen. It's just a
matter of time.''
Only six wells have been drilled in the remote South
Atlantic island, the subject of a 1982 war between the U.K. and
Argentina. Those wells, the only exploration in a region half
the size of Texas, were drilled in 1998, when oil prices on the
New York Mercantile Exchange sank as low as $10.35 a barrel,
compared with $79.66 today.
Rendell dismissed a report yesterday that Argentina will
``formally'' protest BHP's oil exploration permits, as reported
by the state information agency Telam. Argentina earlier this
year forbade companies that explore in the Falklands, which it
calls Islas Malvinas, from investing in Argentina.
``We're fairly used to it,'' said Rendell. ``Nothing has
changed as far as we're concerned. We're a British overseas
territory and nothing has changed overnight.''
BHP, the world's largest mining company, on Oct. 2 said it
agreed to acquire at least 40 percent of two Falkland licenses
with an option to increase to 65 percent. In return, it will
help finance a drilling program for Falkland Oil and Gas Ltd.
BHP said Argentina's concerns wouldn't affect its plans.

High Rates

``We will proceed as per our agreement with Falkland Oil &
Gas,'' Mark Lidiard, a London-based BHP spokesman, said today in
a telephone interview. ``We don't comment on issues of
sovereignty.''
The BHP licenses cover areas south of the islands, an area
that has yet to be drilled.
Exploration by Falkland Oil and Gas and other companies had
been stymied by high drill rig rates compounded by as much as
$30 million to transport a drill rig to the islands, a distance
of more than 8,000 miles (13,100 kilometers) from Aberdeen, the
U.K. center for oil exploration in the North Sea.
Royal Dutch Shell Plc, which led the 1998 drilling and has
since abandoned the region, defrayed costs by forming a sharing
agreement with other oil companies. That strategy may work
again.
``The previous model of sharing a rig worked for
everybody,'' said Rendell. ``Not everyone is ready to drill.
Those that are ready would take advantage.''
By coincidence, the Falkland Islands this week hosted its
first group meeting since 1998 between government and company
officials with prospects in the area, including Desire Petroleum
Plc , Borders & Southern Petroleum Plc and Rockhopper
Exploration Plc.
``We arranged this back in January but the meetings have
been influenced by the announcement,'' said Rendell. ``It's
still pretty early days, but it's much more focused.''

http://www.falklandnews.com/public/story.cfm?get=4694&source=3

(Falkland Islands)



OIL OPERATORS PUBLIC MEETING REPORT (04/10/2007)

http://www.sartma.com/art_4609.html

HYDROCARBONS WEEKEND RECORD: 05 TO 07 OCTOBER 2007

Compiled by J. Brock (FINN)


ASSESSMENT OF RISK KEY TO BHP AGREEMENT WITH FOGL

By J. Brock (FINN)


The Falklands are awash with oil optimism now that BHP Billiton has decided to farm-in with Falkland Oil and Gas (FOGL). One key factor in the decision to farm in with FOGL was the risk involved with exploratory drilling in FOGLs prospects in the South and East Falklands Basins. It is understood that British Geological Survey (BGS) assesses the risk in the North Falklands Basin as one in five and in the South and East Falkland Basins it is more like one in ten. With those odds it is a wonder why anyone would be interested in farming in so there must be something that lowered the risks. Part of the answer comes with the more detailed 3D seismic and, more importantly, the CSEM study that began in February this year.

Before he left the Falklands FINN asked Mr. Tim Bushell, CEO of Falkland Oil and Gas about FOGLs assessment of risk and why it is so much better than BGSs predictions.


FINN: In the public meeting you mentioned that there would be no drilling unless the risk is assessed and that risk is at least one in three. How is the risk assessed?


TB: One prospect in Desire tranches actually has a 1 in 2 risk. Oil Companies are fairly standard in the way they assess risk. There is an assessment of risk on every prospect in accordance with characteristics of prospects.

BGS have the view that a 1 in 5 risk exists in the North and a 1 in 10 risk in the South. No big Oil Companies would disagree that this is a frontier prospect however, all of the seismic work and CSEM helped to reduce the risk in the North as well as in the south and east. Risks in the north are lower than those in the south however FOGL believes risks in the south and east are lower than 1 in 10.

FINN: What are FOGLs specific risks?

TB: FOGL risks are lower than 1 in 10. After the risk assessment using CSEM and 3D Seismic, the risks were lower than 1 in 10 and information will be published later. It is important that BHP feel the risks are lower than one in ten, otherwise they wouldnt have come in with FOGL.

FINN: How many companies did FOGL approach?

TB: FOGL approached sixteen companies a year ago - both the majors and super majors. We came up with a list of companies with the financial resources necessary to bring a rig to the Falklands. Ten companies responded to our visit to the United States and to the data we presented. More than half took interest but were on the fence except for BHP.


FINN: What of the others?



TB: Later if more want to come in they might not be able to come if they hesitate too long.


At the public meeting it was surmised that other oil majors will indeed want to come to the Falklands once they felt BHP was on to something.


FINN: How did the CSEM and 3D Seismic reduce the risk?


TB: The CSEM showed a prospective anomaly of 1 in 2 or 1 in 3. There is a chance some major companies might be interested in this data but they havent seen the survey yet. It will be published later this year.


FINN: What will you expect to accomplish next January?


TB: BHP representatives will be coming with us. This will be their first visit to the Falklands. BHP will clearly need meet key people and to see services available - what could be provided. Specialists will also come along who know how to run a drilling programme. It is likely they will take a look at access facilities.



BHP has presented their work to FIG and FOGL and did extensive background work. You might say its now time to hit the gas now the agreement has been announced


FINN: Where will FOGL and BHP begin exploration drilling?


TB: BHP have a short list the same as FOGLs. They have some more technical work to be done before we begin exploration drilling.

.

We will be awaiting the results of Mr Bushells January visit with BHP representatives.

http://www.falklandnews.com/public/story.cfm?get=4698&source=3

FALKLANDS BUSINESS SECTOR LOOKS FORWARD TO JANUARY FOGL/BHP VISIT



By J. Brock (FINN)



Businesses in the Falklands are awaiting the visit of Tim Bushell from Falkland Oil and Gas (FOGL) and representatives from BHP Billiton. While we are being assessed by them, businesses will be vying for position with accommodation, office space, telecommunications and entertainment the list is endless. It is expected that during this phase of the exploration the oil companies will be operating for more than a year.



For their part, the exploration companies must secure the all-important rig. An oil well cannot be designed unless a rig is procured. Six months notice must be given to the Falkland Islands Government prior to any drilling so that wells can be designed. Once that rig is procured things will move quickly.



Day rates for a semi-submersible rig suitable to drill in the Southern and Eastern Falklands basins are now around $500,000.00. Drill ship rates are considerably higher at approximately $700,000.00 per day. Dr. Colin Phipps of Desire Petroleum mentioned in last weeks interview that a drill ship is more self-contained and can move quickly from one prospect to another.



As mentioned prior to the Oil Operators meeting in the Falklands, drilling facilities are not all suitable for the North, South and East Falklands Basins. Hopefully this will bring the operators together to see if there are any viable alternatives for all of them. It could be that BHP will decide to find more than one rig for the Falklands.



One slide that Tim Bushell showed at the Public Meeting showed an LNG facility off Norway. This would require the product coming ashore in the Falklands. The volatile resource would need to be processed here. Dr. Phipps mentioned Gas to Liquids technology that could be operated from a specially designed drill ship. GTL technology produces high grade diesel.



All of this could work for businesses in the Falklands we wait and see.

http://www.falklandnews.com/public/story.cfm?get=4704&source=3

Hydrocarbons Daily Record (11 October 2007)