The Designated Exploration Area (Location map) covers over 400,000 Km2, and is therefore almost as big as Texas and about 50% bigger than the UK North Sea. The rather oddly-shaped area is based on a preexisting fisheries conservation zone; the western boundary of the area is more or less coincident with the eastern limits of the Argentine EEZ.
The Designated Area is subdivided into Quadrants based on one degree of latitude by one degree of longitude (Map of Quadrants/Blocks), each of which is subdivided into thirty Blocks. The numbering system used for the Quadrants and Blocks is similar to that in the UK North Sea, and wells are numbered in a similar fashion; for example, 14/09-1 refers to the first well in Quadrant 14, Block 09.
Exploration Licences
What they are for
Exploration licences are designed to allow companies to acquire speculative and/or proprietary seismic, gravity, magnetic, geochemical and sea-bed data. They do not allow drilling deeper than 350m below seabed.
Where they apply
Exploration Licences are not area specific and can apply to all of the Designated Area (or such other smaller area as agreed). However, they do not apply to the Special Area of Co-operation.
Activities undertaken under an Exploration Licence may extend into a Production Licence area only with the consent of the Production Licence holder.
Furthermore, if a Production Licence holder is using a third party to acquire data on its behalf within its Production Licence area, it must ensure that the third party holds an Exploration Licence in its own right in order to conduct such surveys. However, Production Licence holders do not require an Exploration Licence unless they intend to conduct surveys themselves outside the confines of their Production Licence areas.
How long they last
An Exploration Licence is normally issued for one year, renewable for up to three years.
Notification and data requirements
All surveys to be conducted under an Exploration Licence must be notified to the Director of Mineral Resources at least 30 days in advance of operations starting. Holders of Exploration Licences are required to supply copies of all data to the Governor (or more usually to the British Geological Survey). All data will be held in confidence by the Falkland Islands Government for a period of five years (or longer as determined by negotiation) but may then be released to the public.
Applications for an Exploration Licence
An application for an Exploration Licence can be made at any time by submitting three completed copies of an application form obtainable from the Director of Mineral Resources (or downloadable below), enclosing an application fee of £1,000 (cheques made payable to the Falkland Islands Government).
Production Licences
The two types of Production Licence
Production Licences fall into two types:
» Competitive Round Production Licences - issued as a result of a competitive bidding process in 1996;
» Open-Door Production Licences - issued as a result of individual negotiation since 2001.
Competitive-round Production Licences
Competitive-round Production Licences will be issued only as the result of invited, competitive bidding during well-defined licensing rounds initiated by the Falkland Islands Government. Applications will not be accepted outside licensing rounds except in the case of acreage that has been relinquished by two or more companies, in which case a non-invited application can be made either by one of the relinquishing companies or by any group including one of the relinquishing companies. The opening of any further licence round competitions will be announced in the Falkland Islands and London Gazettes and will be advertised in the trade press.
These licences can be maintained for a total period of up to 57 years, composed of three exploration periods totalling up to 22 years and an exploitation period of up to 35 years. The exploitation phase may be started only after the approval, by the Governor, of a development plan. A development plan can be submitted for approval at any time during the 22 year exploration period. The competitive-round Production Licences currently extant (see below) comprise four stages, with some partial relinquishment of acreage applicable between the various stages. Terms may change for any future competitive licensing rounds: any such amendments will be gazetted by the Falkland Islands Government at the time.
Competitive-round Production Licences - Phase 1
The first exploration phase of current competitive-round Production Licences was for five years. However, this initial exploration period was extended in 2000, by the Falkland Islands Government, to provide up to an additional 3 years during the first phase, despite the fact that all Phase 1 work programmes had been completed by existing licensees. That is, the first phase will now run until October 2004, there is an automatic fifty per cent relinquishment of acreage at the end of the first phase. However, as well as the 50% retained automatically, an additional 10% can be retained for each of the first three exploration wells drilled within the first phase, and all the acreage can be retained if four or more wells are drilled.
Competitive-round Production Licences - Phase 2
The second exploration phase of seven years allows for completion of the work programme specified in the original licence application, including drilling. Entry to the second phase includes a commitment to drill, unless the agreed drilling commitment for this phase has already been discharged during the first exploration phase.
There is an automatic fifty per cent relinquishment of remaining acreage at the end of the second phase.
Competitive-round Production Licences - Phase 3
The third exploration phase of 10 years allows for further exploration and appraisal drilling. Entry to the third exploration phase requires a renewed drilling commitment on the exploration acreage, and is therefore also on a drill or drop basis.
Competitive-round Production Licences - Exploitation and Development phase
The exploitation phase of Production Licences will last for 35 years
Open-door Production Licences
All acreage not already covered by an existing or relinquished Production Licence, but excluding the Special Co-operation Area, is available for the award of Production Licences as part of the open-door system. However, acreage will not be licensed in environmentally sensitive areas or within twelve miles of the coastlines of the Falkland Islands. These licences can be maintained for a total period of up to 8 years for exploration, a further 5 years for appraisal drilling/development planning after a discovery has been notified, and then for 35 or more years for exploitation purposes. The exploitation phase may be started only after the approval, by the Governor, of a development plan, which can be submitted for approval at any time.
Bids for open-door Production Licences can be made at any time for any number of whole blocks (12' longitude by 10' latitude) up to a total of 30 contiguous blocks in any one licence. Within these limits, the applicant is free to determine the size and shape of the area bid for. There is no limit to the number of licences (each of up to 30 blocks) that can be applied for by an applicant at any time.
Bids for these licences will be opened at mid-day Stanley time on the last working day of each month. Any bids received after that time will be opened on the last day of the next month. Decisions regarding applications will be made as soon as possible thereafter. In addition to a completed application form, companies will need to provide full details of their fiscal and technical records and their environmental and health and safety policies.
Open-door Production Licences - acceptable work programmes
A work programme is required for the area bid for. A work programme will be acceptable only if it contains one or more of the following elements:
1. acquisition of an extensive and intensive geochemical "sniffer"- type survey;
2. acquisition of an extensive and intensive aeromagnetic survey;
3. acquisition of an extensive set of sea-bed cores testing the stratigraphy of the feather edges of presently unexplored basins or sub-basins;
4. acquisition and processing of 2D and 3D seismic data;
5. the drilling of one or more exploration wells.
Desk studies and the acquisition of presently available data sets, whether proprietary or non-exclusive, will not be regarded as acceptable work commitments, and Production Licences will not be issued for such work.
Successful applicants for open-door Production Licences would be expected to comprehensively acquaint themselves with any existing data sets available for the licence area.
Open-door Production Licences - Phase 1
Open-door Production Licences allow for phased exploration periods, but these are different to those for competitive-round Production Licences. Phase one of the open-door licences can comprise three or five years depending on the work programme commitment.
Open-door Production Licences - Phase 2
There is an automatic 50% relinquishment of the licensed area before Phase 2 can be entered. There will be no entry to Phase 2 if the Phase 1 work programme commitment has not been fulfilled. Phase 2 of the licence is for 3 years. Entry to Phase 2 is on a drill or drop basis.
Open-door Production Licences - "Notification of Discovery Area"
If a discovery is made at any time during either Phase 1 or Phase 2, a "Notification of Discovery" should be made to the Governor.
A "Discovery Area" can be held, under the terms of the licence, for 5 years from the date of spudding of the discovery well, to allow time for appraisal drilling and/or the submission, for the Govenor's approval, of a development plan. However, either appraisal drilling or the submission of a development plan must commence within three years of the date of a discovery, or the licensee's interests in the "Discovery Area" will be forfeited.
Open-door Production Licences - Exploitation and Development phase
An approved development plan confers the right to exploit the field for 35 years or, at the Governors discretion, until it is no longer commercially viable. Approval of a field development plan will expire if production has not commenced within 5 years of approval being granted, and the licensee's interests in the Discovery Area will be forfeited.
Further terms and conditions of the two types of production licences and location of current licences can be found at www.falklands-oil.com
