Falkands Oil work faces delay as Argentina threatens drillers

Oil explorers in the Falklands have been forced to delay drilling work due to falling petroleum prices as a diplomatic spat between Argentina and the UK over drilling around the islands intensifies.

London-listed driller Falklands Oil and Gas (FOGL) said on Monday that it and its partners had shelved plans to drill a second well in the south-east of its exploration area.  Tim Bushell, chief executive, said: “The actions taken are in the best interests of shareholders.

We believe that disciplined capital management is crucial in the current oil price environment and this decision leaves FOGL in a stronger financial position.”

Oil prices have fallen 50pc since last June to trade around $60 per barrel, placing many high-risk projects, such as the exploration work being carried out around the Falklands, at risk.

Earlier this month, FOGL and its partners, Rockhopper and Premier Oil, said the Zebedee exploration well was “better than expected” in the Falklands basin. The explorers found an oil reservoir 25 metres thick and a gas deposit 17.5m thick sandwiched between sands.

The find has prompted an aggressive response by the government in Buenos Aires.

President Cristina Fernandez de Kirchner last week said that FOGL and its partners had no right to be drilling in the area and that they risked legal action if they persisted.

Argentina continues to pursue its claims to the Falkland Islands despite its failed invasion in 1982. However, FOGL plans to continue exploration work in the waters around the islands in the South Atlantic on a revised schedule of work.

The Falklands are thought to hold billions of barrels of undiscovered oil and the region is home to rich fishing grounds.

Mr Bushell said: “FOGL has retained significant exposure to a very exciting four-well drilling programme, which commenced with a significant oil discovery at the Zebedee prospect.

Positive results from any of the following wells could add significantly to a growing reserve base.

“We are very satisfied with this alternative plan for the exploration of the South and East Falklands basins, which provides more time to fully utilise the extensive 3D seismic dataset, assimilate the results of the Humpback well and take advantage of the lower rig and services costs that may prevail."

telegraph.co.uk