Falklands Oil – What Happen once Oil Was Found?

Once you have a find the region is reclassed as viable. That in itself raises the SP as its not a guessing game anymore.

Also, because there is oil that requires a local infrastructure, that also means that the operating costs for anyone else who strikes the black stuff also goes down-lower on costs/higher SP.

Then you have a factor that they all have shares in each other so there is a knock on effect there and the publicity itself increases purchases of equities in the falklands sector.

 I am far more excited aout a second find as opposed to quality as then we are not talking about a one off coincidence (I dont think we are anyway). Also, there is a long way between reserves being found and first oil which coud take 5-10 years in my experience.

Oil as a commodity isn't bookable until you get whats called 'first oil' (the point at where a construction project turns into an operation-with defined costs and profits etc.) and its actually metered and tanked.

So the first find is juat the start of the story. Take Azerbaijan as an example, Amoco got in early as soon as it became an indempendant state, Bp then bought out Amoco and in the latter stages of the project (ACG/BTC.SCP an Shah Dinez gas) were pumping in 15Bn dollars per anum. But that's small potatotes compared to the 20 year lease they have on the field and 1m+ barrels per day.

The trick is once you have found it, to negotiate how long your extraction license is and then get it out as quick as you can. Also, BP got the world bank involved with loans (for ethcal resasons as they dont need the money) so there are loads of places to go for RKH to fund the jackets, topsides and infrastructure to get to first Oil.

The two things are important

1) flows well (which means they dont need water injection-extra cost, or to deal with the produced water-more cost and hassle)

2) there is a market for it, Also high quality could add a premium.

There is a lot to occur yet in terms of duties etc to be levied and what RKH will be left with per barrel, but I suggest we enjoy the ride because even if Enest is a flop or Toroa it won't have the same impct in the SP as Des when it drilled Beth.

BUT, the upside is massive because if they do hit lucky again, it makes all the CSEM stuff look reaslisitc and then the SP of everything will go seriously up.

The main reason for this is there are too many big investment funds etc, who literally model this (its a well know scenario) and can't afford to keep out of the action because the fund managers would get shot. At present they all have a healthy interest, but will likely act in unison like parhanas once more good news arrives.

Don't forget as well that all this talk of takeover is only potential...FOGL is 51% owned by BHP who are bigger than BP, and there is nothing stopping big players taking strategic stakes (in fact what Oil companies frequently do is lay off stakes in the project to other oil companies (like bookies layoing off bets) e.g in Azerbaijan BP had say 34%, CHevron 10%, Total 5% etc as it spreads the risk andthe reward.

but its all only to the good of the SP and the shareholders to have the risk and reward balanced and Major Shareholders wont see their potential diluted or equally ovr risk.
Hope this helps, but there is a long way to go and once they have a god idea of the size of the find it is likely they may lok for strategic partners, but thats what makes a successful project as its a huge undertaking to take all this risk on yourself..I am very positive..

Compositional analysis, oil distillation and gas C1 to C12+, GOR, salts, pour point, cloud point, viscosity, trace elements, metals, mercury, sulphur, water content (ppm), sediment, calorific value, copper corrosion, asphaltenes, naptha and of course, density and associated specific gravity and API gravity.........................can be measured concurrently (depending on resources) and within 24 hours.

Do them all three times to ensure repeatability (unusual and dependent on the number of pressurized downhole samples actually taken) - 3 days.

We are not waiting 10 days for analytical estimations.

Now, we may be waiting for the time taken for the samples to reach the laboratory and subsequent to analyses, full understanding of what's down there.........but my guess is that we are waiting 10 days to do all of this and for RKH to gather their thoughts and have everything put in place before they tell us exactly what they plan to do next - AFTER they have made the appropriate arrangements to do them.

What I am not sure about is whether or not RKH will be in a position to give even an approximate recoverable figure without a well test - that's for our resident reservoir engineers and geologists to say - it would be nice if they were"

 API test is done quickly (densitometer - Kyoto, Anton Parr etc). There are a dozen different factors making up a good crude and the API Gravity which is no more than the density at 15 centigrade after conversions are applied, is not the be all and end all of everything.

A waxy crude could be a nightmare for example. There may also be several labs involved in specialist angles of analyses - depending on the suite of RKH requirements.
One thing's for sure. 24 hours after the arrival at the NAMAS Lab, the general properties of this crude will be known.