Global Processing

Oil Drilling Starts in Falkland Islands

February 22, 2010
Despite protests from Argentina, which claims the British territory, drilling on the first oil well in the Falkland Islands in over a decade started on schedule, according to Reuters. Explorer Desire Petroleum broke ground at a well on its offshore "Liz" prospect. It could contain reserves of up to 400 million barrels, analysts said, although the risk of hitting nothing was also seen as high. The run-up to drilling in the Falklands led to rising tensions between Britain and Argentina, which went to war over them in 1982. Argentina said earlier this month the exploration was illegal, and blocked the loading of pipes on to a ship, which it said had operated in the Falklands, known as Las Malvinas in Argentina. The British government has protested to Argentina over a law passed in December that includes the disputed islands within the Argentine province of Tierra del Fuego. The sea around the Falklands could contain up to 17 billion barrels of oil and 51 trillion cubic feet, or 9 billion barrels of oil equivalent, of gas, according to a report in 2000 by the U.S. Geological Survey. High oil prices and advances in drilling technology have spurred optimism in recent years. The dispute with Buenos Aires over sovereignty is expected to make exploitation of any oil found more expensive than otherwise since supplies and equipment cannot be imported from Argentina, which has its own oil and gas industry. The spat also means any gas discoveries will need to be very large to be commercially viable as the island''s population of around 2,500 is a limited market and the gas cannot be piped to the mainland. Only if a gas discovery were very large would it justify the construction of a liquefied natural gas (LNG) terminal from which the gas could be exported in pressurized ships. Seven wells in the seas around the islands are planned for this year.