'A fine day to strike Falklands oil'
Updated on 06 May 2010
Today's announcement that a British company has struck oil off the Falklands could prove as momentous as the small political earthquake hitting Britain today, writes Faisal Islam.
Rockhopper Exploration said initial data collected from the Sea Lion prospect showed that one well had found oil that was 25 metres at its thickest point.
It said further assessments would be made of the well before deciding the next move.
Managing director Sam Moody said: "We are extremely excited by the results of this well. While we are presently acquiring additional data, current indications are that we have made the first oil discovery in the North Falkland basin."
This is only an initial find, and it is very deep: 7,000 feet down. But the implications are enormous.
Peter Kemp, editorial director of Energy Intelligence, told Channel 4 News: "It's an encouraging result for a tiny company with a massive exposure to a frontier play. But at this stage we can't really say more than 'encouraging'.
He continued: "Clearly, they (Rockhopper) haven't hit a big one. If they had, we'd know about it."
Rockhopper used the Ocean Guardian to drill ldown 2.7km into the seabed before it struck an oil zone. The largest deposit within that zone was 25 metres deep, it said.
Rockhopper released a statement to the markets this morning, and its shares took off - up 149 per cent on the day. Shares in rival explorer, Desire Petroleum also rose, by 85 per cent to 70p.
Although experts think the find is significant, don't expect oil production any time soon. Rockhopper is sharing the oil rig with three other firms, so it will have to return to the Sea Lion well at a later date.
Faisal Islam: a fine day to strike black gold
As Daniel Day Lewis said in the seminal oil man film There will be Blood. Somewhere in the South Atlantic, in the North Falkland basin.
Rockhopper's leased oil rig, the Ocean Guardian, has hit oil. "Well 14/10-2 on the Sea Lion prospect has reached a depth of 2,744 metres. Initial data collected indicate that this well is an oil discovery, which would be the first in the North Falkland Basin."
Channel 4 News has been tracking the prospects of oil around the Falklands for some time. My colleague John Sparks flew out to the south Atlantic in February when drilling commenced.
Rockhopper hit oil at the first attempt at Sea Lion, after a previous exploration of the Liz prospect by Desire Petroleum drew blank. Rockhopper's share price surged 150 per cent on the news dragging up other small companies' share price too.
It's not yet possible to tell how many millions of barrels Rockhopper has discovered, but it has made the first step along the road of a commercial find. More testing is required before the size of the find becomes apparent.
It was always known that the Falklands sits on a bed of the black stuff. What matters is how much of it is commercially viable to recover. The basic answer is that far more is commercially viable with an oil price at $80 per barrel than it was in 1998 when Shell abandoned some small finds in the vicinity of today's Rockhopper find with the oil price barely above $10.
Eyebrow-raising estimates suggest as much as 60 billion barrels across the whole of the Falklands, basically another North Sea - a figure scoffed at by many of the Big Oil executives I have spoken to.
For his part, Samuel Moody, Rockhopper's managing director, said: "We are extremely excited by the results of this well. While we are presently acquiring additional data, current indications are that we have made the first oil discovery in the North Falkland Basin."
So we don't know how much oil there is, but we now know there is some. This holds out the prospect of a transformative find for the UK, and possibly divine intervention on our nation's long-term debts (there's no chance that anything could come on stream in time to pay down the current deficit problem).
I am certain that if there are big finds, the UK Treasury will adopt a hefty share of the proceeds. There will be tension and careful negotiation with Argentina. Only last week Buenos Aires reimposed restrictions on maritime traffic between Argentina and the Falklands.
Remember that historians could argue that North Sea oil was as momentous for Britain as many single elections. Depending on how much of the black stuff eventually makes it out of the ground, this press release from a company, named after a type of penguin, that you have never heard of, could become as momentous as the small political earthquake hitting Britain today.
Suki Cameron interview
Channel 4 News interviewed the Falkland government's UK representative, Sukey Cameron, about what the oil find would mean for the islanders. Ms Cameron told us that the find was very "exciting" and would enable to them to contribute more to the cost of keeping an armed garrison there.
She said: "We've been told that the well was successful and that Rockhopper are drilling at the moment. It's very exciting and encouraging, for them and us.
"The oil companies put a lot of work and a lot of investment into these wells that they're drilling at the moment. The fact that it looks like its paid off is very, very exciting.
"They've put faith in the area, it's taken a long time. The first wells were drilled there in 1998, so it's been a long haul.
"I should stress that even if they do find oil in commercial quantities, it will still be a long time down the road, 10 or 15 years… but it would give us another income stream which we do need.
"We're very dependent on the monies from fisheries and tourism at the moment. It would enable us to continue our self sufficiency.
"But we'd also like to contribute more than we currently do to the cost of our defence.
"We’re totally self financing apart from defence. But we all make a very big contribution to the cost of the garrison there and it is our intention that we'd like to make more of a contribution to that cost."