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Oil & Minerals

Faroese close in on oil

As offshore drilling project set to resume next month one Faroese oil firm reports finding oil - just not on its home turf
Oil & Minerals
An island in a sea of oil

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A decade-long effort by the Faroe Islands to establish the country as a petroleum economy appears to be close to paying off.

As the search for oil in the far North Atlantic intensifies, the country, a self-governing member of the Danish kingdom, has been able to register two promising developments in recent weeks.

Most recently, Faroe Oil, which operates in the Atlantic Margin, the North Sea and Norway, announced yesterday that it had struck oil and gas in the Norwegian Sea.

The firm, which is headquartered in Aberdeen and listed in London, said the Pil Prospect, in which it owns a 25 percent stake, appeared to have a “very high net to gross ratio”.

Testing is taking place to establish how big the reservoir is, but Faroe said the well was a candidate for possible fast-track drilling.

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Further drilling will be required before more can be said about the find, which is part owned by VNG Norge, Spike Exploration Holdings, and Rocksource Exploration Norway. Markets, however, reacted positively to the announcement, bidding up Faroe shares by as much as 15 percent, encouraged in part by the find’s location next to a field currently being operated by Shell.

Graham Stewart, the Faroe managing director, described the area where the Pil Prospect is located as “prolific”.

“We look forward to unlocking further potential on this licence,” he said.

Faroe had 10 Norwegian licences and Pil is one of three areas where the firm is currently drilling. The results of the other two, at Solberg and Butch East, were expected in the coming weeks, the company said.

Faroe’s find, though outside of Faroese territory, comes as something of an encouragement for the Faroe Islands, which has been overshadowed by Greenland, also a member of the Danish kingdom, in discussions about resource exploitation.

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Like in Greenland, oil companies are convinced there are significant oil deposits in the Faroese offshore underground, and exploration has been underway since the early 2000s.

No commercial oil finds have been made in Faroese waters, but next month exploration of the Brudgan oil field is set to begin. Drilling will be undertaken by Statoil, ExxonMobil and Atlantic Petroleum, a Faroese-based firm, and comes after  exploration of the field, first drilled in 2012, was postponed due partly to poor weather conditions.

As a measure of the potential for the Faroes’ potential, an estimated 17 of Britain’s undiscovered oil deposits are found in the waters between the Shetland Islands and the Faroes.

While it remains uncertain whether the Faroese sector of the North Sea will prove as prolific as the waters off Norway, firms operating in the Faroes, including Dong, the Danish state oil producer, have expressed confidence that oil will be found in the near future.

“We will stay in the Faroes as long as we believe there are opportunities to discover oil and gas, but it is also decisive we make a discovery and I hope we do so this summer,” Henrik Poulsen, Dong’s managing director, told portal.fo, a Faroese website, earlier this year.

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Even if oil is not struck, prospecting efforts are proving a boon for the country’s economy, which is currently based almost entirely on fishing and which Torshavn is keen to diversify, not least as a way to stem the tide of young people, especially women, leaving the country.

The Brugdan drill could provide a taste of what would be in store for the economy, should it strike oil: Statoil will consume 12 million litres of fuel to during the operation, or over 10 percent of what the two companies selected to supply the fuel normally sell in a year.

Put another way, that is four times more than the fuel consumed by all the factory-fishing vessels the firms currently supply.