Rockhopper advances Falkland Islands prospects

The Falkland Islands have long attracted interest by the oil and gas industry.

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Peter Howard Wertheim
Contributing Editor

The Falkland Islands have long attracted interest by the oil and gas industry. The Falkland Islands comprise some 340 islands, situated in the South Atlantic approximately 300 mi (483 km) to the east of South America.

The US Geological Survey has estimated that the seas around the islands could hold as much as four billion barrels of oil. But so far, only British oil and gas company Rockhopper Exploration Plc. has been able to strike a reservoir that could prove commercially viable.

Six wells were drilled in the North Falkland basin in 1998. Oil and gas shows were recorded in five of the six wells. The oil price was approximately $10 at the time, and none of the wells were declared commercial.

The dramatic price gains of recent years have reinvigorated Rockhopper's drilling campaigns. In December, the company reported a "fantastic result" on exploration well 14/15-4 in the British North Falkland basin.

Samuel Moody, Rockhopper's CEO, said that the positive results from this aggressive campaign "will further increase our minimum estimates of oil in place for Sea Lion and Casper, in addition to proving two new discoveries in Beverley and Casper South, which is our third oil discovery in the basin."

So far, Rockhopper is the only company that has found a potentially commercial oil field near the Falkland Islands.

The campaign included multiple reservoir targets: Beverley, Casper South, Casper, and the Sea Lion Main Complex; and was drilled under Rockhopper license operation PL004b for a total of 57 m (187 ft) of net pay in 89 km (55 mi) of gross reservoir.

The14/15-4 well-site is 12.1 km (7.5 mi) southwest of the 14/10-2 Sea Lion discovery well and 6.3 km (3.9 mi) south of the 14/10-9 Casper discovery well. Rockhopper is the operator, and earned a 60% interest by drilling the well. Desire Petroleum PLC has a 40% carried interest.

Analysts estimate that Rockhopper could recover as much as 430 MMbbl of crude from Sea Lion. Rockhopper officials said they believed that its Sea Lion Main Complex had 1.297 Bbbl of oil reserves, in addition to its nearby Casper field, which was estimated at 90 MMbbl.

A recent Rockhopper report on exploration well 14/15-4 affirmed that these positive findings. According to the report, wireline logging and formation test data indicate that all four targets are hydrocarbon-bearing, and no water--wet sands were observed in the well.

Rockhopper has 100% of four offshore licenses in the North Falkland basin, PL023, PL024, PL032, and PL033. The PL023 and PL024 licenses collectively cover approximately 811 sq mi (2,100 sq km) and PL032 and PL033 licenses cover 625 sq mi (1,620 sq km). Rockhopper has also farmed into licenses PL03 and PL04, which total 517 sq mi (1,340 sq km).

Beverley area

At the Beverley area, analysis of mud logs indicates the gas is likely to be a wet gas. The well penetrated the Beverley prospect near the crest of the structure and the sand was encountered at 2,359 m (7,740 ft) measured depth below the rotary kelly bushing on the drilling rig.

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Some of the key oil and gas basins in the Falkland Islands offshore areas.

The company said that the discovery was of gas, and the gross reservoir is 27.5 m (90 ft) thick, approximately 10 m (32.8 ft) more than forecasted. The net gas pay is 25.8 m (85 ft) and net to gross was rated 94%. The total gross reservoir is 89 m (292 ft) and total net pay of 57 m (187 ft).

As per the reservoir quality, the report says that average porosity is 22% with a maximum of 27%. The average permeability is 45 md and maximum is 144 md. When referring to permeability, the report pointed out that the permeability log data is negatively affected by the presence of gas. The company believes that the effective permeability in the Beverley and Casper South gas legs will be significantly higher than measured on the log.

Permeability in Beverley is likely to be in the region of 500 md, while permeability in the Casper South gas leg will be similar to those in the Casper South oil leg. No gas/water/oil contact was observed.

Pressure, volume, and temperature (PVT) analysis will be required to confirm the gas/condensate ratio (GCR). From the observed formation pressure gradients, the company believes that the gas/oil contact observed in Casper South at well 14/15-4 and Casper at well 14/10-9 is likely to exist in Beverley. As a result, company officials believe that Beverley may be oil-bearing downdip.

Casper South area

This oil and wet gas discovery has a gross reservoir of 24.5 m (80 ft) with net oil pay of 11.6 m (38 ft); net gas pay of 8.5 m (28 ft); and the net to gross rate is 83%. Casper South sand was encountered at 2,420 m (7,940 ft).

The reservoir quality of the Casper South gas leg indicated good average porosity of 25%, maximum 30% and the average permeability 212 md, maximum 1,327 md. The Casper South oil leg porosity averages 27%, maximum 34%, and permeability averages 1,011 md, maximum 5,872 md.

Although gas/oil contact was observed at 2,429 m (7,969 ft), very close to that observed in well 14/10-9 in Casper, no oil water contact was observed.

Casper

The gross reservoir of Casper successful appraisal well is of 12 m (39 ft); the net oil pay of 2.4 m (8 ft); with net to gross rate of 22%. Considering reservoir quality, porosity averages 16%, maximum 24%. The average permeability was of 33 md, maximum 71 md. No oil water contact was observed.

Casper South is a separate fan lobe, to the south of and apparently in communication with the Casper fan, which the company currently maps to extend over an area of greater than 100 square km (38.6 sq mi) with significant down-dip oil potential.

The well additionally penetrated the Casper sand some 6.3 km (3.9 mi) to the south of the 14/10-9 Casper discovery well in a relatively down-dip position and at the very feather edge of the mapped fan lobe. The Casper reservoir was encountered at 2,450 m (8,038 ft) and is entirely below the gas/oil contact observed at well 14/10-9.

The Casper reservoir sands are all oil bearing at 14/15-4. The company believes well 14/15-4 defines the southernmost limit of Casper with a thin reservoir section of low net to gross sand. The presence of Casper at this location enables the company to confirm mapping of this fan lobe to the maximum extent of its seismic expression and to increase the volumes currently carried for that prospect. Analysis of mud logs in well 14/10-9 indicates that the gas at Casper is a wet gas. PVT analysis will be required to confirm the GCR.

Sea Lion Main Complex

The well penetrated the Sea Lion Main Complex (SLMC) in license PL004b approximately 12.1 km (7.5 mi) from the 14/10-2 discovery well, 6.3 km (3.9 mi) to the south of well 14/10-9, and 13.8 km (8.6 mi) from the northern most successful appraisal well, 14/10-7. The SLMC was encountered at 2,474 m (8,117 ft) measured depth below the rotary kelly bushing on the drilling rig.

The company believes the well is close to the southernmost limit of the Sea Lion field and at the outer edge of its former maximum case area. The well penetrated a section which established the gross thickness of the reservoir as mapped. The quality of the reservoir at this outer edge of the fan system was as forecasted with a lesser net to gross and slightly lower porosities than in the main core area of the field.

Formation pressure testing established that the oil lies on the same pressure gradient as observed over the rest of the field, and oil samples have been recovered for subsequent PVT analysis.

The company will now complete a short offset side track, 10 m (32.8 ft) from main well bore, to obtain core in the Beverley, Casper South, and SLMC formations.

Rockhopper announced that theOcean Guardian semisubmersible drilling rig has been towed from the final well location and is off hire. Operations at the 14/15-4 joint venture well were completed on Jan. 8, 2012.

The Sea Lion discovery was successfully tested during September 2010 and June 2011 and was the first oil to flow to surface in Falkland Islands waters. Company officials say that the field could start producing oil by 2016 and reach 120,000 b/d by 2018.

Rockhopper contracted seismic vesselsMV Polarcus Asima and Nadia to carry out a 3D seismic survey over areas of licenses PL024, PL032 and PL033 which were not previously defined by 3D, as well as adjacent areas. The company expects the interpretation that is still being processed to be available at the beginning of 2012.

On licenses PL003 and PL004, which are operated by Desire Petroleum, Rockhopper has a 7.5% working interest. In addition, in consideration for drilling one well on the north-western acreage of license PL004, known as Area 1, Casper, and Casper South features Rockhopper has farmed-in with operatorship and an aggregate 60% interest in Area 1.

The company has further farmed into the northeastern part of license PL004 known as Area 2, where Rockhopper can invest in the Jayne prospect and the eastern part of the Beverley prospect, with 25% interest. Rockhopper has received the necessary regulatory approvals, including consent for change of operatorship on license PL004b (Area 1) which it now operates. These licenses have been granted by the Falkland Islands government.

The 2D and 3D seismic and controlled source electromagnetic mapping (CSEM) were also undertaken under the same license. In February 2010, theOcean Guardian drilling rig arrived in Falkland waters to carry out a multi-well drilling campaign. Rockhopper drilled an exploration well on its Sea Lion prospect during April and May 2010, the result of which was the first oil discovery and contingent oil resource in the North Falkland basin.

In terms of investment, a successful farm-out of the Sea Lion discovery is central to Rockhopper's campaign success. The Sea Lion discovery is likely to be commercially viable. After the successful appraisal drilling campaign last year, the focus of the company is on engineering and financing as it moves toward a final investment decision for a future oilfield development project

Having already discovered oil in the North Falkland basin, Rockhopper could try to bring in a partner to develop the new oil field. However, the company's continuing investments may increase oil resources in the future; and because Rockhopper is the largest holder of undeveloped resources in the North Falkland basin, some analysts speculate that it may also become a takeover target.

Resource nationalism

Argentina's President Cristina Fernandez de Kirchner, who recently won re-election by a landslide, advocates resource nationalism and works hard for international backing.

With the support of neighboring Brazil and Uruguay, Argentina has already ensured the companies cannot count on South America as part of their supply chain. Argentina insists that any boat passing through its waters must have a permit to do so. This move has caused tensions with Great Britain, and those tensions have escalated when Spanish fishing vessels operating with British licenses have been intercepted.

Latin American nations from Brazil to Uruguay have lined up to declare that they would not allow their ports to be used to support any British energy initiatives off the Falklands.

Rockhopper announced that it believes that it can build production facilities without access to South American ports – even though its plans to use FPSOs to store oil before offloading will add to its development costs.

For its part, the British government has sternly criticized Argentina's intention of controlling the Falklands' sea trade. Argentina still lays claim to the British-controlled South Atlantic Islands, known as the Malvinas in Spanish.

In 1982 Argentina and Britain fought a brief but bloody war over the windswept archipelago, and the 11-week conflict claimed more than 900 lives, leaving Britain having reasserted its sovereignty over the islands.

Other efforts

British company Falkland Oil and Gas (FOGL) says that it has maintained a dialogue with a potential partner in its efforts to develop oil and gas off the Falkland Islands, and recently announced that another drilling platform would arrive in the area by the February 2012. The platform will be drilling two wells for Borders & Southern, another oil drilling British company, and two wells for FOGL.

The Author

Peter Howard Wertheim is based in Rio de Janeiro and can be reached at peterhw@frionline.com.br

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