Borders and Southern Petroleum (BOR: LN), the British oil exploration company, yesterday announced that the reserve of gas condensate it discovered in the Falkland Islands back in April 2012 is both commercially and technically viable.
Share prices for Borders and Southern Petroleum rose 12.5% to 27.37 pence when the news was released that initial studies had deemed viable the development of the gas condensate, a liquid form of gas that trades at a premium to natural gas.
The field is not yet ready to start production as more appraisal drilling, at an estimated cost of around $1.6 billion to $3.8 billion, is needed to fully determine the potential of the play. The exploration company is already looking for partners to share in the next drilling period.
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The problem is that the Darwin discovery (as it’s known) is situated in a remote location in the South Atlantic far from any markets; so whilst it may be technologically viable to extract, it must be a large deposit for it to also make economic sense.
The Falkland Islands have been under British rule since 1833, yet Argentina have always contested their rule, claiming them as their own, and even invading the small colony in 1982 to try and take control by force. Argentina’s hostility has not deterred companies from exploring the islands hydrocarbon potential, which are expected to start producing their first oil in 2017.
By. Joao Peixe of Oilprice.com