Significant Gas Discovery South of the Falkland Islands

On 23 April 2012, oil exploration company ‘Borders & Southern Petroleum’ said it had discovered ‘significant’ gas condensate reserves south of the Falkland Islands, opening up a new and controversial oil and gas basin. The company said it would now conduct tests on samples of fluids recovered from the reservoir.
"It is too early to give an accurate resource estimate," it said, but the rock was "likely to contain significant volumes". Chief executive, Howard Obee, said: "We're delighted to have made a discovery with the company's first exploration well and to have opened up a new hydrocarbon basin.”

Oil was found to the north of the Falklands two years ago by a company ‘Rockhopper’, which is now seeking to develop its assets. However, this is the first discovery to the south of the disputed islands.  Borders & Southern is to drill another well before passing the rig to Falkland Oil and Gas (FOGL), which will drill at two other prospects.

Argentina has ramped up its rhetoric against British oil and gas companies in the region this year, but threats of legal action against them or their financial advisers have so far failed to disrupt the explorers' plans.

The UK Government, in a move designed to ease concern among the investment community about recent Argentine legal threats over their involvement in the Falkland Islands oil industry, has written to fifteen British and American banks and oil exploration companies operating in the region.  In the new letter, the Foreign Office says it is “deeply skeptical” that Argentina would be able to enforce “any penalties” in courts outside its own borders. It adds that the government of the Falklands “is entitled to develop” oil and fishing industries in its own waters “without interference from Argentina.”  To back up these words, the Royal Navy's newest warship has been dispatched to the South Atlantic. The £1billion Type 45 destroyer HMS Dauntless is on her maiden mission, and is being construed as a show of strength, as Buenos Aires ratchets up tensions over sovereignty of the disputed territory.

All of this is against a rapidly changing political backdrop, with Argentina facing international condemnation for its seizure of Repsol’s majority stake in YPF, Argentina’s largest oil company.  See our earlier article at http://www.crsrisk.com/blog/index.php/2012/04/repsol-warns-argentina-in-ypf-interests-row/