The first wells of the modern era (there may have been older ones, I don’t know) were six drilled around 1998 in the North Falklands Basin. A sniff of gas and oil was found in two of them. Other wells have since been drilled, and nothing found anything to write home about. The current minor hoo-hah relates to an old well which has been “re-interpreted” to suggest that it did cut oil-bearing reservoir. Since the early wells, FOG and Desire have been at the forefront, raising funds for more seismic and drilling, together with Rockhopper and one or two other minors and special vehicles. A few of the majors have partnered some work.

BP originally turned down the opportunity, because modelling suggested that the source rock hadn’t ever been buried quite deep enough for proper maturation. I’m a bit cynical about such companies, some of which carefully don’t risk any personal capital, but raise all their exploration funds on the market. If it works, they make a personal fortune, and if it doesn’t, they lose nothing.

Suppose BP was wrong. Some reports say the British Geological Survey have suggested 60 billion barrels may have been generated. That’s a big “may”. Even if true, it has to be expelled from the source, migrate, find a trap and been well sealed. Then perhaps a third of what has made it so far, may be recoverable. That might be where the 18 billion barrel number comes from, but I haven’t drilled into the data to make sure.

The point one has to remember about risked reserves is this. The rock structures might be big enough to hold 60 billion barrels. The modelling might show that 60 billion barrels could have been generated, if certain assumptions are correct. But the probabilities of every single factor being in favour are very small. You have to take the probabilities of:

– Rich, thick source rock sufficient to source the 60 billion barrels
– Adequate maturation of source rock, AFTER formation of suitable traps
– An effective migration pathway to the trap
– Good reservoir rock in the trap – good porosity and permeability, good connectivity between layers, good net-to-gross (i.e. lots of sand and no shale)
– An effective seal without fractures

Suppose each factor has a 33% chance of working. Multiply together the probabilities of each factor working, and suddenly you’re typically at < 1% probability. So you take your 60 billion, multiply by 1% and get 600 million barrels of risked reserves. Finally, you can extract a third of that, or 200 million. Hardly a world-beater at this stage! It can only get better when the odds for each factor can be shortened from (say) 33% to 90%. This can be done with drilling – you prove reservoir, you prove mobile oil, you prove trap volume etc.

No-one knows, and only Dr Drill provides the eventual true diagnosis. I wouldn’t put a penny of my own money down there. I would expect a few hundred million to a billion barrels recoverable might eventually be discovered there. I wouldn’t be surprised if nothing commercial was found. I would be surprised but not suicidal if several billion barrels were eventually produced.

Dr. Richard Miller is an Independent Consultant, and former geochemist for the BP Exploration Department