Falklands Oil & Gas presses on offshore the Falkland Islands

Source: Falklands Oil & Gas Limited

In order to provide further drilling options across Falkland Oil and Gas Limited (LON:FOGL) acreage, the company will undertake a site survey program in the first half of 2011 on its acreage offshore the Falkland Islands in South America. The vessel is currently mobilizing to the Falklands, and the survey program is expected to commence in late February 2011. 

The vessel will undertake surveys on a number of separate sites including Vinson, in the Tertiary channel play, and a prospect within the mid Cretaceous fan play that will be selected on the basis of work currently being undertaken. The Company is also considering a site survey on Inflexible, a Springhill fault-block and Undine, a prospect in the Tertiary fold-belt play. These prospects are similar to those that Borders and Southern intends to drill later this year and one of the aims of the site survey programme is to develop options to drill such prospects in the event that Borders and Southern has encouraging drilling results. 

In addition the Company may elect to acquire up to 1,300 km of new 2D seismic data, using the same vessel. This data will assist with prospect definition and aid the selection of drilling locations. 

Data from the site surveys will be incorporated into environmental impact statements ("EIS"), to be submitted to the Falkland Islands Government ("FIG") later in 2011 as part of the approval process for drilling. 

Rig negotiations 

Negotiations are currently under way with respect to securing a suitable deepwater rig for drilling within FOGL's acreage. A further update will be provided when and if, these discussions result in a firm contract being agreed. 

Full results from Toroa exploration well 

As announced in July 2010, the Toroa F61/5-1 exploration well, which was drilled to a total depth of 2476 metres, did not encounter any reservoired hydrocarbons and was plugged and abandoned. However the initial data provided some encouragement and a full review has been undertaken. The information will be used to aid future drilling plans. 

The full compilation and assessment of the Toroa drilling results has taken longer than originally planned. The delay is a result of a number of factors including problems with initial transport of samples to the laboratory in North America and the later requirement for additional analysis by another specialist geochemistry contractor. 

The main risk prior to drilling was integrity of the trap. In order for hydrocarbons to be trapped in Toroa an effective side seal was required. Such a seal is created by sands passing laterally into sealing shales and is referred to as a stratigraphic trapping mechanism. There are many giant fields (>500 million barrels) that rely on such stratigraphic seals. 

Reason for failure of the Toroa prospect 

FOGL's post-drill analysis suggests that Toroa had no lateral seal to trap migrating hydrocarbons. The seismic amplitude and AVO response, which had been interpreted to be hydrocarbon filled sands, were probably the result of a lithological effect (rock type) and in particular due to low density carbonaceous shales and coals that were found overlying the Springhill reservoir. These lithologies may have also contributed to the 'false positive' anomaly seen on the CSEM data. 

Implications for future exploration elsewhere in the basinDespi

FOGL believes that the results of the Toroa well have no negative impact on the plays and prospects in the deepwater area of our licences. In particular, they have no bearing on the risk or hydrocarbon potential of Loligo and other prospects within the Tertiary channel play which lie over 250 kilometres away to the north east of Toroa. The seismic amplitude and AVO response at Toroa resulted from the presence of certain rock types that are highly unlikely to be present in the deep-water plays within the Company's acreage.

"The Toroa exploration well was the first well in a previously undrilled frontier basin and although the outcome was disappointing the full analysis of the data has provided encouragement,” said Tim Bushell, chief executive of FOGL. “The mid Cretaceous and Tertiary plays are entirely unaffected by the result and we are pursuing these in 2011. As such we have decided to undertake further site surveys in the now 100% owned southern licence area. In the meantime, we continue to work to secure a suitable deepwater rig and negotiations are currently under way."



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