Will Britain be asked to join OPEC? Huge oilfields are under the sea off the (British) Falkland Islands.
25/10/2009

Deep in the South Atlantic Ocean, just off the Falklands Islands, lies an estimated 60 billion barrels of untapped oil. That’s so much oil that The Times dubbed these British islands “the new Kuwait”, if it can be brought on tap. Many years ago I had a strong impression that the Falkland Islands would feature big in future oil production. I bought- and forgot about- shares in Desire Petroleum, run then by the man who had a big role in finding Britain's North Sea oil. Now it seems that Desire and other companies may come good- and the implications are enormous. This story is taken from Fleet Street Invest.  As we've used their report we include their commercial information, but we are not linked to them in any way and do not benefit financially from any investments readers may make with them. AF.Is Britain About to Become the New Kuwait?  The Right Side | By Frank Hemsley Themes: Oil, Britain, Trend Investing Just imagine if you could have invested in the United Arab Emirates or Kuwait before they struck oil…Overnight, these countries turned into the world’s wealthiest as oil brought status, power and billions of dollars worth of investment. Well, this is the extraordinary position you may find yourself in today.You see, deep in the South Atlantic Ocean, just off the Falklands Islands, lies an estimated 60 billion barrels of untapped oil. That’s so much oil that The Times dubbed these British islands “the new Kuwait”, if it can be brought on tap.The thing is though, up till now, no drilling has been done. So far, the small companies that are operating in the area (I’ll mention them in a moment) have carried out all sorts of preparatory work. Seismic surveys, controlled electromagnetic surveys (CSEM) and environmental impact studies. But they have not actually been able to drill into the seabed and get to what lies beneath.Why? Because there has been a chronic shortage of drilling rigs. Tom Bulford tells me that big oil companies grabbed all the available rigs in order to maximise production at this time of high oil prices. These big oil majors moved out of the Falklands basin back in the late 1990s when the oil price fell to around $10 a barrel and it stopped making commercial sense to waste money exploring there. So that means there are no rigs in the area. But with the oil price on the rise again since 2007, all available rigs have been monopolised by the majors who have been prepared to pay over $500,000 per day for the privilege. This has put drilling rigs out of the financial reach of small oil explorers, especially those situated in such a remote location as the Falklands Islands. As Tom explained to me, the last time there was a drilling campaign in the Falklands it took 74 days just to tow a rig to the area – at $500,000 a day that would cost $37m!But now there’s an easing in the rig market. Rates have been coming down and finally, the small oil explorers active in the Falklands are about to start moving…In fact just yesterday I spotted a little bit of news in one of my colleague’s newsletters that suggests drilling for oil be one step closer to happening. “Desire Petroleum (ticker: DES) has announced it has exchanged a letter of intent with Diamond Offshore Drilling (UK) Ltd. This is to use Diamond’s Ocean Guardian drilling unit to undertake a four well minimum drilling campaign in the North Falkland  Basin.

“The Ocean Guardian is currently in the North Sea and following a programme of shipyard work will mobilise in November 2009. Projected arrival in  Falkland waters is early February 2010. Desire has options to drill a further four wells for itself and or its partners. Further details will be announced after contract completion which is subject to various approvals.”
That news has caused a surge in the share prices of all the small oil explorers active in the Falklands area. Desire (DES) is up 34%, Falkland Oil & Gas (FOGL) 16%, Falkland Island Holdings (FKL) +19% and Rockhopper Exploration (RKH) +36%. Of course, there’s a lot to do yet. But this is a major development in the Falklands oil story. It’s a story that isn’t that new. These huge oil fields were first discovered in the mid 1970s by American geologists. And in fact, long-time readers of The Right Side, The Daily Reckoning and Profit Watch, may remember that we have talked about the huge opportunity in Falklands oil before. Perhaps you were even one of the readers who bought into specific stocks that we have recommended over the years.If not, this could be a good chance to get in. If Tom Bulford is right, then this promises to be one of the hottest oil stories of the next few months. He’ll be hoping that he can replicate the success he gave his readers recently when they made gains of up to 700% in the Kurdistan oil play, Gulf Keystone.If the Falklands Islands do indeed turn out to be “the new Kuwait”, then the companies that have licences on its oil stand to make huge riches. And their investors will make riches too.Best wishes, Frank Hemsley
For The Right Side
Editor's note: Tom Bulford has reviewed all the main Falkland Island gas explorers in his Red Hot Penny Shares. And he has chosen one of them as his best way to play the coming oil bonanza. Click here to get Tom’s original Falklands oil research and the latest issue of Red Hot Penny Shares.Please note: Past performance and forecasts are not reliable indicators of future results. Your capital is at risk when you invest in shares, never risk more than you can afford to lose. Seek independent financial advice if necessary. Fleet Street Publications Ltd. 0207 633 3600.

 


 
 
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