The corridors of power in Buenos Aires would have been chortling with laughter yesterday as the British oil boom in the Falklands looked like going bust, even before it began.
Over the last month, as the oil-industry hype grew, the war of words between Argentina and Britain escalated, threatening to become a full blown diplomatic war.
But yesterday, the main exploration company involved – Desire Petroleum – announced that the results of its first well, called Liz, were extremely disappointing.
The news would have been met with glee in Argentina and dismay in London.
In a stock market announcement, Desire said that initial results from the Liz 14/19-1 well, in the North Falkland basin showed that “oil may be present in thin intervals but that reservoir quality is poor”.
The news wiped nearly 50 per cent of its share value. Shares in other companies operating off the Falklands also fell amid fears that the whole region could literally turn out to be a damp squib. Rockhopper and Falkland Oil and Gas, both saw their shares plummet 26% and 11.4% respectively.
Desire tried to undertake damage limitation. Until further tests are carried out “it will not be possible to determine the significance of the hydrocarbons encountered and whether the well will need to be drilled deeper, suspended for testing or plugged and abandoned,” the company said.
Further announcements are due, potentially as early as tomorrow.
The company pledged to keep on drilling though. It is the first of as many as seven wells to be drilled in this new phase. Drilling in the southern basin is expected to begin later in the year.
Despite the setback, Malcolm Graham-Wood, director of broking at Westhouse Securities, said that the area could yet yield a significant discovery.
“The North Sea wasn’t found with the first well,” he said. “This campaign is a roller coaster ride but it would be wrong to write this basin off just yet.”
Maybe the Argentinean champagne will have to be put on ice.