Falkland Islands: Another Oil Discovery

On 28 May, Premier Oil announced another oil discovery at Isobel Deep, about 30km south of the Sea Lion field. The oil was discovered at a depth of 2,500 metres at a higher than expected pressure and of similar quality to the oil already found at Sea Lion. This will require further appraisal but, along with the discovery at Zebedee, the first well to be drilled in this current round, it confirms the presence of substantial reserves of oil in Falkland Islands waters – analysts predict a reserve of about 1 billion barrels of recoverable oil around the Falklands.

Falkland Islands Director of Mineral Resources, Stephen Luxton, was properly cautious in his response, saying that the early signs were that a working hydrocarbon system existed in that part of the basin.

The rig, Eirik Raude, will now move to the Humpback area, leased by Noble Energy, to the south-east of the Falklands before returning to Premier Oil’s Jayne East and Chatham sites. The rig may also drill another well to complete the contracted 6-well project.

A decision on whether or not to begin the exploitation of the Sea Lion oil field is expected to be taken in 2016; if the go-ahead is given, the first oil is likely to flow in 2019. Much depends on the price of oil. Premier Oil has already had to reduce their plans for a large tension-leg platform in favour of a floating platform to create a more easily deliverable scheme at substantially less cost. Even so, work is going ahead in Stanley to provide the necessary infrastructure and storage capacity to support the planned production phase.

The Foreign Secretary, Philip Hammond, dismissed Argentine complaints about this new discovery as ‘bullying’ and described their domestic legal action against companies involved in the exploration for hydrocarbons in the Falkland Islands as ‘an outrageous abuse of international procedure.’ ”