London-listed company carries out geological tests in the face of legal threats from Argentina
The possibility of an oil boom around the Falkland Islands which could further inflame tension between Britain and Argentina was raised on Thursday with “exciting” new well results and details on a separate £2bn production plan.
Shares in Borders & Southern rocketed 59% after the London-listed company reported positive results from the latest geological tests increasing the chance of a second commercial oil and gas discovery, this one off the south of the islands.
Premier Oil meanwhile unveiled new details of a $3.2bn (£2bn) plan to develop the first oil off the north of the island despite reservations from some in the City about the scale of the scheme and legal threats from Argentina.
Premier said the more expensive plan would involve buying a floating production and storage and offloading (FPSO) vessel to handle oil from 22 subsea wells in the South Atlantic.
But the government in Buenos Aires is using this year’s 30 year anniversary of the Falklands War as an opportunity to restate its claims to control the islands, known as the Malvinas.
The Argentinian foreign ministry recently wrote to British oil companies working offshore threatening court action unless they brought drilling to a halt.
The explorers seem undaunted. Borders said the initial yield from gas condensate samples taken at its well in the South Falkland basin varied from 123 to 140 standard barrels per million cubic feet, more than the level analysts said was needed for commercial potential.
“It definitely looks good…What [the numbers] mean is that essentially this is a commercial discovery, the first in the South Falkland basin,” said Sanjeev Bahl, an analyst at Numis Securities.
“There’s potentially more adjacent discoveries to be made, because it’s not going to be the only large condensate discovery in the South Falkland basin,” added the analyst.
Borders chalked up success in April, when it found gas condensate at its first well, but disappointed with a dry well last month sending its shares crashing downwards.
Premier first needs to tie up a $700m deal with rival, Rockhopper Exploration, giving it access to the Sea Lion field. It expects to do this by October and hopes to see first oil flowing by 2017.A detailed presentation was given to City analysts as Premier reported record pre-tax profits of $194.6m, up from the same period of last year at $32.5m.
Industry experts said a second development by Borders would give critical mass to the Falklands as a new oil “province.” This would help stock market confidence, make it potentially easier to physically develop the oil with more companies in the region as well as making it harder for Argentina to legally harrass individual companies.
The British government has promised to stand by its oil explorers and believes Buenos Aires would be unable to enforce any court judgements against UK firms outside of Argentina.