Exploration for oil offshore the Falkland Islands is at a very early stage and no commercial discoveries have been made yet. In 1998 six wells were drilled to the north of the Islands resulting in a wealth of geological data. These first wells proved the presence of a very rich organic source rock that could have generated up to 60 billion barrels of oil, bringing oil to the surface in one well and finding quantities of gas in another.

Strict environmental legislation regarding offshore surveying and drilling activities is in place. Licensed areas are well away from the coastline and companies are required to prepare environmental impact assessments and oil spill plans when planning drilling activities. In order to safeguard the fishery, seismic surveys are restricted to specific times of the year. Oil companies operating offshore have also been able to collect new oceanographic and wildlife data, enhancing knowledge of the area.

As a result of rising oil prices, the Falkland Islands have become a more attractive frontier area for exploration, with a number of new companies being licensed to explore for oil in 2004.

It is expected that oil companies will drill more exploration wells in the North Falkland Basin in 2007, following an 800 sq km 3D seismic survey completed by Desire Petroleum. A 2D survey is being carried out in the southern licensed blocks by Falkland Oil and Gas Limited (FOGL) and Borders and Southern Petroleum. Good results are being produced during early interpretation of these data. Drilling could begin in the southern basin as early as 2007. If a commercial discovery is made in the next decade, production is likely to be by using floating production vessels known as FPSOs. Oil is taken directly from the FPSO by shuttle tanker to refineries around the world and there would be no requirement to bring oil ashore, thus keeping impact on the Islands to a minimum.

An aeromagnetic survey was flown over the Islands in the first half of 2004 and onshore prospecting licence holders, Falkland Gold and Minerals Limited, plan to carry out shallow drilling on identified targets over two years. They are hopeful that they will find accumulations of gold and other metals. Modern mining legislation with required environmental and planning controls became law in the Islands in May 2005.

Further information can be found on www.falklands-oil.com