France’s EDF Buys Into Falkland Oil Wells Amid Dispute
A unit of France’s state-controlled power company bought a stake in exploration wells planned by Falkland Oil & Gas Ltd. (FOGL), undeterred by Argentina’s claim to sovereignty over the South Atlantic islands.
Edison International (EIX) SpA , a unit of EDF, will receive a 25 percent interest in Falkland Oil’s northern licenses and a 12.5 percent interest in southern licenses off the archipelago that Margaret Thatcher went to war to keep British in 1982. Edison will pay drilling costs of about $50 million and make a separate cash payment of $40 million, Falkland Oil said today in a statement.
Edison, the Italian utility acquired by EDF last month, is the first French-owned company to invest in exploration off the islands. British Prime Minister David Cameron reiterated this month there would be no negotiation over the territory’s future after Argentina protested the deployment of a warship to the region.
“The rhetoric hasn’t affected our plans so far,” Falkland Oil Chief Executive Officer Tim Bushell said in a telephone interview. “It’s a tricky year because of the anniversary of the war but we hope it calms down from here.”
The shares climbed 1.1 percent in London. The stock has gained 71 percent this year.
Before agreeing to sell the stake to Edison, the company held talks with companies based in North America, Europe, the U.K. and Asia, Bushell said.
The European Union last month censured Argentina for the seizure of oil producer YPF SA (YPFD) from Spain’s Repsol SA and challenged Argentina’s import restrictions at the World Trade Organization. The 27-nation EU is Argentina’s second-biggest export market and its top foreign investor.
Falkland Oil raised 48.5 million pounds ($76 million) in January and is fully funded for the two wells it plans this year targeting more than 4 billion barrels of reserves. The deal with Edison frees up about $100 million for future investments, Bushell said.
An EDF spokeswoman couldn’t be reached for immediate comment.
Falkland Oil said it expects to receive the Leiv Eiriksson rig in July, a month later than planned, after Borders & Southern Petroleum Plc (BOR) completes its Stebbing well. Bushell said results from the first well in the Loligo prospect are expected in September.
Borders & Southern in April announced a discovery of gas condensate in its Darwin prospect, close to Falkland Oil’s fields. If gas is discovered at Loligo rather than oil, it could contain as much as 30 trillion cubic feet, enough to justify building a plant to liquefy the fuel for shipping, Bushell said.
Rockhopper Exploration Plc (RKH), the only company to have made a commercial discovery in the Falklands so far, is seeking $2 billion from a larger oil company to develop the Sea Lion field on the northern side of the islands.
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