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Gas Glut? Not for Long.

Gas Glut? Not for Long.

Low prices invariably stimulate stronger…

British Companies Find Oil Off Falklands; Argentina Threatens Prosecution

The UK and Argentina marked the 33rd anniversary of the start of their 10-week Falklands War with British energy companies announcing the discovery of oil and gas off the islands and the Argentine Foreign Ministry immediately countering with a threat of prosecution.

The energy discovery at the Zebedee well about 200 miles north of the Falklands was announced by Premier Oil Plc. and Falkland Oil and Gas Ltd., the first strike in a regional drilling campaign that began last summer. The discovery included an oil reservoir 81 feet deep and a gas basin 55 feet deep.

The Zebedee well is part of a larger drilling enterprise by the British companies called Sea Lion, and uncertainty remains about its development for now, according to analysts at the US brokerage Stifel. “A full appreciation of the significance of today’s result may have to wait until the conclusion of the drilling campaign later this year,” they wrote.

Related: This Is What Will Determine If Oil Prices Go Up Or Down

Premier Oil owns 36 percent of the Zebedee well, and Falkland Oil and Gas owns 40 percent. A third British-listed company, Rockhopper Exploration, owns the remaining 24 percent.

The Falklands, which Argentina calls the Malvinas, have long been part of a tug-of-war between Buenos Aires and London, which both claim the islands in the South Atlantic off the Argentine coast. They have been under British control since 1841.

Argentine forces invaded them on April 2, 1982, and claimed them in an effort to establish sovereignty under Buenos Aires. Britain responded by sending a naval task force, and on June 14 Argentina surrendered, returning the islands to British control. The two countries eventually restored full diplomatic relations in 1989, but the ownership of the Falklands remains in dispute.

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Argentina was quick to react to the announcement of the oil and gas strike on April 2. Foreign Ministry officials in Buenos Aires said the British energy companies would face prosecution for what they called illegal operations in Argentine territory.

President Cristina Fernandez de Kirchner condemned the British energy exploration as well. “Our land has always been invaded, first by the Spanish, then by the English,” she said during a speech in the Argentine city of Ushuaia.

The reaction from the British companies was, as expected, much more upbeat. “This is a fantastic start to the 2015 Falklands drilling campaign and provides early proof of the significant remaining potential of the North Falkland Basin,” said Samuel Moody, Rockhopper’s CEO.

Related: Christie’s White House Ambitions Block NJ Wind Project

The discovery was made in the first of four exploratory wells that the three British companies plan to drill with the Eirik Raude floating drilling rig, which is expected to work its way from regions north of the Falklands to the islands’ east and south.

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For now, though, the Zebedee well will be plugged and left unused until the rig finishes their work at the three additional wells.

By Andy Tully of Oilprice.com

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