Interest in Falkland Islands oil exploration rose today after US oil firm Noble Energy agreed a deal to take control of licenses from explorer Falklands Oil and Gas.
Noble is to farm-in to Falklands Oil and Gas’ (FOGL) northern and southern area licences, apart from areas containing its Loligo and Nimrod prospects, taking a 35% stake and operatorship in early 2013 and 2014 respectively.
The deal, announced by FOGL, will see Noble – the first US player in the Falklands – pay £16million in cash and invest £115million-£147million in the basin in the next three years.
Charles Davidson, Noble Energy’s chairman and chief executive, said he believes the area contains more than six billion barrels of oil.
“We believe this region is very consistent with our new ventures exploration strategy of entering regions that provide prospects that are not only material in size, but also where initial success can de-risk subsequent opportunities,” he said.
“In this particular case we have already identified numerous oil leads on 2D data with an unrisked gross resource potential exceeding six billion barrels of oil.
“Once completed, this transaction will increase our worldwide leasehold by over 70% gross and 40% net.”
Analysts Oriel Securities said the entry of a listed US firm into the Falklands area “may help allay some of the concerns over Argentina”.
The British-governed Falklands has seen increasing tension from Argentina, which claims sovereignty over the islands it calls Las Malvinas.
Today, it was reported that Venezuelan state oil giant PDVSA was in talks with Argentine counterpart YPF to conduct oil and gas exploration around the Falkland Islands.
Last week lawmakers in Buenos Aires passed a law to stop ships involved in business activities off the Falklands from mooring at its ports.
FOGL also today announced it had started drilling on the Loligo prospect, 124 miles east of the islands, with partner Edison International using the Leiv Eiriksson semi submersible drilling rig.
FOGL has described the well as one of the highest-impact exploration wells to be drilled by an independent this year.
Shares in FOGL rose 12% today following the two announcements.
Noble had been linked with talks over a deal with Rockhopper Exploration, before Premier Oil, which has offices in Aberdeen, inked a deal.
It took a 60% stake in Rockhopper’s licences containing the massive Sea Lion discovery, north of the Falklands, in a deal worth £643million.
Noble said in June it was considering a total exit from the North Sea after selling stakes in the central North Sea Dumbarton and Lochranza fields and the associated Global Producer III vessel.
The deal will leave FOGL with 40% in the northern area licences, excluding the areas containing the Loligo and Nimrod area prospects.
Noble will have 35% and take over operatorship in due course with Edison International holding the remaining 25%.
FOGL will be left with 52.5% in the southern area licences, with Noble holding 35% and Edison 12.5%.
FOGL will retain 75% equity and operatorship in the Loligo and Nimrod areas with Edison holding the remaining 25% interest.
FOGL said that, following the deal, the costs to it of its two planned exploration wells – Loligo and Scotia – it would be left with £128.6million of funds for further exploration, likely to include two 3D seismic surveys
Tim Bushell chief executive of FOGL, said: “We are delighted that Noble is joining us in our exciting exploration programme.
“We have now brought in two highly respected international exploration and production companies (Noble and Edison) and, with this strong partnership in place, we have the financial and technical resources to help realise the potential from our large acreage position in the Falkland Islands.”
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