The Falkland Islands have been relatively quiet since the sparring between the United Kingdom and Argentina 22 years ago. But that's about to change.

"It is just coming to a head now," said Phyll Rendell, director of mineral and agriculture for the Falklands Islands government. "Desire Petroleum has stayed interested in the northern region since 1998, and they are acquiring 3-D seismic," she said. "We could expect drilling within 18 months."

Desire holds exploration licenses for blocks in the North Falkland Basin, covering trenches C, D, F, I and L. In April 2004 it completed acquisition of 310 sq miles (804 sq km) of 3-D seismic data over blocks C and D, and after fast-tracking interpretation of that data by RPS Hydrosearch in September 2004, it concluded the prospectivity of the region was better than expected. Desire's chairman Dr. Colin Phipps said in a 2004 interim report, "The fast track interpretation will, therefore, provide the company with an early basis for continuing discussions with potential farm in partners."

Phipps said the North Falklands was established as containing, "one of the worlds richest oil source rocks and that substantial quantities have been generated and expelled from it." Phipps he later said, "At current oil prices, reserves as low as 30 million bbl of recoverable oil would be commercial."

The company has identified up to eight prospects in the territory with estimated reserves of 2.4 billion bbl of oil (see map).

Meanwhile, Falklands Oil and Gas (FOGL) is targeting new exploration to the south after raising US $21.6 million from the London stock market to finance a 2,187-mile (3,500-km) 2-D survey off the south Falklands. FOGL officials have said there are at least eight leads with estimated reserves of between 200 million bbl and 600 million bbl of oil in water depths from 1,312 ft to 5,490 ft (400 m to 1,800 m). FOGL formed in early 2004 to explore 13,008 sq miles (33,700 sq km) south and east of the islands and has seven production licenses. The company plans to use the 2-D survey to further delineate and rank the eight identified leads followed by a 580 sq mile (1,500 sq km) 3-D program in 2005 to identify drilling locations. Offshore drilling is expected in late 2006 or early 2007.
Rendell is realistic and cautious about what lies ahead, "We are at the very, very early stages, similar to the UK North Sea in the early 1970s," she said.

The new exploration campaign will take place against the backdrop of the war, when Argentina invaded the islands in March 1982. After a brief and bloody war lasting 2 months, British troops regained possession of the islands. Despite this, Argentina has not relinquished its claim to the islands since, and friction between Argentina and the United Kingdom over the islands continues.

Although the Falklands are just 400 miles (640 km) from the Argentine mainland, it still looks to the United Kingdom for protection. Since the Falklands war, a large military base and airfield has been built on the island.

Rendell said Argentine President Nestor Kirchner has taken a "fairly firm" line in relations with the Falkland Islands, contrary to previous presidents who had sought more friendly relations. "The Argentines are not particularly looking for cooperation with the islanders, and there will be some challenges here," she said.

But while the military presence on the islands remains, it will bolster confidence in the political climate there. Uncertainty over Falklands geology may be the bigger concern, and its prospectivity warrants further investigation by exploration companies - if they desire.

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