Executive viewpoint

I have been fortunate in my career, to have been posted to some of the world’s most exciting frontier locations in the oil industry’s ongoing search for new resources. My postings have ranged from the UK North Sea to northern Russia, and from Vietnam and Trinidad to, most recently, the hunt for oil offshore the Falkland Islands in the South Atlantic.

I have worked both on- and offshore, and been lucky enough to be part of several world-class organizations with a genuine talent for finding oil. This has given me a hard-won perspective on the search for hydrocarbons, and on what it actually takes to open up a frontier area, especially as the industry looks to stretch its technological capability and management of political and geological risk beyond the now-largely-exhausted ‘easy stuff.’

Naturally, when considering the hunt for new oil and gas, many people see the industry’s challenges as being focused principally on geology’s roulette wheel—are the rocks right? Do they conform to what your early technical work tells you, when you actually drill? Have you missed the oil’s earlier migration? And, even if it is there, is it recoverable in sufficient quantities to enable economic production?

These inherent risks play on the minds of explorers, as they deploy precious capital in increasingly expensive and technically difficult drilling environments. All of these questions are highly relevant, and never more so than when wildcatting in underexplored regions, such as the Falklands, where my company, Rockhopper, undertook a high-profile campaign in 2010.

But, my experience over 28 years in the industry is that the challenges companies face at the frontier are often rooted in what is not there, as opposed to what might be: infrastructure, easy financing, proximate markets, an existing skilled workforce, a sustainable fiscal regime, a stable political environment and local stakeholder support.

When Rockhopper’s founders, Sam Moody and Richard Visick, recognized the opportunity to revisit acreage last drilled in the late 1990s, but abandoned due to the (ultimately very brief) era of $10/bbl oil, their focus was on the rocks. The previously drilled wells had suggested that there was, indeed, a working hydrocarbon system in the North Falkland basin, but the perceived economic incoherence of exploiting reserves in a location with such a low oil price environment had led to the departure of big game hunters, such as Shell, and Amerada Hess, departing after a single phase of drilling. Times change, and the current period of historically high oil prices has underpinned interest in frontier areas, in a way that would not have been possible 15 years ago.

Often, smaller players in the E&P sector act as the pioneers, opening up new territories while the majors stand back, waiting for evidence of material hydrocarbons before diving into new provinces. In this way, companies, such as Cairn in India, Rockhopper in the Falklands, and Tullow in Ghana/Uganda, open up new exploration territories by taking the risks that larger companies do not initially see as likely to reap material-enough dividends.

The focus and detailed preparation required in frontier areas, as well as long-term relationship-building with key local stakeholders, suits the approach utilized by independent E&P firms, where each asset’s potential is hugely material to the business and does not get lost in a global portfolio. The ability to move quickly to address challenges, often unforeseen, as they arise in territories where there may be no history of oil exploration and limited, if any, infrastructure, is essential.

As we drilled our exploration program in 2010–2011, we saw great success, with eight out of 10 wells encountering significant hydrocarbons. We were very fortunate to have that almost mythic occurrence—a commercial discovery with our first operated well drilled, with 100% equity in the license. The period of the build-up to the operation was one of intense external interest, given how high-profile the campaign was expected to be, following the continuing dispute between the UK and Argentina over the Falklands.

The rig’s progress was followed closely as it made its way down to the South Atlantic, and each well (Rockhopper’s Sea Lion prospect was the second to be drilled in the program) was covered in detail by the UK media. Not only did the company have to navigate the geological challenge, it also had to do so with great scrutiny from both the media and the market. This was only exacerbated by the failure of the first well: Desire Petroleum’s Liz prospect.

Planning was key to exploring in such a distant location from traditional oil hubs, such as Aberdeen, Stavanger—and slightly nearer—Houston. Preparatory work ensured that the port at Stanley was appropriately equipped, so that everything we needed was on the islands; there would be limits to this approach, though, such as the need to send oil samples back to the UK for detailed technical analysis. But, we managed the supply chain well and the program, in duration and scope, was highly ambitious for a company of our size, went smoothly, delivering exceptional results.

Premier Oil farmed-into the field in 2012, a transaction that saw Rockhopper ensure financing through the development phase, ahead of first oil in 2019, in exchange for selling a 60% stake in Sea Lion. With pre-FEED work progressing, and a TLP selected as the preferred development scenario, Rockhopper looks toward next year’s further exploration of the North Falkland basin with much excitement. We seek to grow the region’s reserves base further, and really establish the Falklands as the industry’s newest oil province.