What they allow

Production licences permit the search for and extraction of petroleum.

They are area-specific and provide exclusive rights for surveying, drilling and production within that area.

Although the licence permits extraction of hydrocarbons, approval must be sought for any development plan before commercial production commences.

Coverage of existing production licences

The areas covered by existing production licences can be downloaded here:

A3 License Map Version:Mar2016 Filesize 3.85 MB Download 2407

Existing production licence holders/operators are:
 

Borders and Southern Petroleum plc

Rockhopper Exploration plc (and subsidiary companies Falkland Oil & Gas Ltd and Desire Petroleum Ltd)

Noble Energy Falklands Ltd

Premier Oil Exploration and Production Ltd

Edison International 

Contact details for any of the above license holders can be found on our contact page.

Previous operators have included Shell, Amerada Hess, BHP Billiton, Lasmo and IPC/Lundin Oil, together with their respective partners.

Operatorship

The licence holders must appoint an operator acceptable to the Governor.

The operator must organise, supervise and be responsible for all activities.

The operator is not allowed to commence any survey or commence, abandon or recommence the drilling of or completion for development of any well without the consent of the Governor. Such consents are obtained by completion of the relevant operations notices, downloadable below.

Good oilfield practices must be observed at all times.

Licence holders must comply with additional conditions to the licences as detailed in Petroleum Operations Notices issued from time to time by the Government.

Situations requiring an additional exploration licence

Production licence holders require an exploration licence to conduct work outside the geographical limits covered by any of their production licences, but do not require an exploration licence to conduct work themselves within the production licence's geographical limits.

However, should the production licence holder appoint a third party contractor to acquire exploration data on their behalf within the area covered by the production licence, the contractor must hold an exploration licence in their own right.

Other general conditions applicable to production licences

No licence or interest in a licence may be assigned without the permission of the Governor.

Applications are welcomed from companies and consortia worldwide. No preference or discrimination will be made for or against any applicant.

All applications will be appraised on a technical and financial basis by the Department of Mineral Resources.

Whilst the participation of Argentine oil companies is welcomed and considered desirable by the Falkland Islands Government, it is unlikely that an award would be made to any applicant group comprising more than 49% Argentine interests, or with an Argentine registered operator.

Notification and data requirements

Production licence regulations require the holder to supply copies of all data to the Governor (or more usually to the British Geological Survey). See downloads for various operations notices, guidance forms, legislation, etc. 

All data will be held in confidence by the Falkland Islands Government for a period of five years but may then be released to the public.

Types of production licence

Production licences fall into two types:

Competitive round production licences – issued as a result of a competitive bidding process in 1996

Open-door production licences – issued as a result of individual negotiation since 2001.

The terms and conditions of the two types of production licences are summarised in the table below.

 

Licence type/summary of terms

Competitive round production licences

Open-door production licences

How to apply

Issued only as the result of invited, competitive bidding during well-defined licensing rounds
Applications will not be accepted outside licensing rounds except in the case of acreage that has been relinquished.
The opening of any further licence round competitions will be announced in the Falkland Islands and London Gazettes and will be advertised in the trade press.

Bids for open-door production licences can be made at any time for any number of whole blocks (12' longitude by 10' latitude) up to a total of 30 contiguous blocks in any one licence. The applicant is free to determine the size and shape of the area bid for. There is no limit to the number of licences (each of up to 30 blocks) that can be applied for at any time.
Bids will be opened at midday Stanley time on the last working day of each month. Decisions regarding applications will be made as soon as possible. In addition to a completed application form, companies will need to provide full details of their fiscal and technical records and their environmental and health and safety policies.

Work programmes

The entire Phase 1 work commitments for all existing production licences issued in 1996 have been completed, or alternative (completed) programmes sanctioned by the Government.

A work programme will be acceptable only if it contains one or more of the following elements:

  1. acquisition of geochemical 'sniffer' - type survey
  2. acquisition of aeromagnetic survey
  3. acquisition of set of sea-bed cores testing the stratigraphy of the feather edges of presently unexplored basins or sub-basins
  4. acquisition and processing of 2D and 3D seismic data
  5. the drilling of one or more exploration wells.

Desk studies and the acquisition of presently available datasets, whether proprietary or non-exclusive, will not be regarded as acceptable work commitments, and production licences will not be issued for such work.
Successful applicants for open-door production licences would be expected to comprehensively acquaint themselves with any existing datasets available for the licence area.

Exploration Phase 1

The first exploration phase was for five years. However, this initial exploration period was extended in 2000, to provide additional years during the first phase.
There is a 50% relinquishment of acreage at the end of the first phase. However, as well as the 50% retained automatically, an additional 10% can be retained for each of the first three exploration wells drilled within the first phase. Relinquishment obligations may be subject to negotiation.

Phase 1 of the open-door licences is for 3, 5, 6 or 8 years, depending on the work programme commitment as outlined below:
a) acquisition of 2D seismic data appropriate to the size of the licence area, plus associated exploration activity - 3 years;
b) acquisition of 2D seismic data appropriate to the size of the licence area, plus associated exploration activity, plus acquisition of 3D seismic data of appropriate size to the size of the licence - 5 years;
c) acquisition of 2D seismic data appropriate to the size of the licence area, plus associated exploration activity, plus drilling at least one well - 6 years;
d) acquisition of 2D seismic data appropriate to the size of the licence area, plus associated exploration activity, plus acquisition of 3D seismic data of appropriate size to the size of the licence, plus drilling at least one well - 8 years.

Exploration Phase 2

Phase 2 is seven years.
It allows for completion of the work programme specified in the original licence application. Additionally, entry to the second phase includes a commitment to drill during the seven years.
There is a 50% relinquishment of remaining acreage at the end of the second phase.

Phase 2 is for five years.
There is an automatic 50% relinquishment of the licensed area before Phase 2 can be entered.
Entry to Phase 2 is on a drill or drop basis and will therefore require a commitment to drill one or more exploration wells.
All the area must be surrendered at the end of Phase 2, unless a discovery has been made and plans are in place to appraise or develop it.

Exploration Phase 3

Phase 3 is ten years.
It allows for further exploration and appraisal drilling. Entry to the third exploration phase requires a renewed drilling commitment on the exploration acreage, and is therefore also on a drill or drop basis.

This does not apply to open-door licences.

Discovery area

This does not apply to competitive round licences.

If a discovery is made at any time during either Phase 1 or Phase 2, a 'Notification of Discovery' should be made to the Governor.
The geological structure, or the aerial extent of the stratigraphic play containing the discovery will then be set aside as a 'Discovery Area', and will not count as part of the exploration or relinquishment schedule for the remainder of Phases 1 or 2 as appropriate.
A 'Discovery Area' can be held for five years from the date of spudding of the discovery well, to allow time for appraisal drilling and/or the submission, for the Govenor's approval, of a development plan.
However, either appraisal drilling or the submission of a development plan must commence within three years of the date of a discovery, or the licensee's interests in the 'Discovery Area' will be forfeited.

Exploitation phase

This phase is for 35 years, or longer if needed to complete production.
Development approval for a projected field can be sought at any time.
If a development plan is submitted and approved before entry to the third exploration phase, the relinquishment of exploration acreage will be 50% of the total acreage that was carried into the second phase, regardless of the existence of a planned development area. However, where any such policy would result in difficulties, for example where one or more potential fields have been identified for development at some future date and a 50% relinquishment would prejudice the development of those fields, the Falkland Islands Government will be sympathetic to any request for amendment of the regulations concerning relinquishment.

This phase is for 35 years, or longer if needed to complete production.
Approval of a field development plan will expire if production has not commenced within five years of approval being granted, and the licensee's interests in the discovery area will be forfeited.

Acreage rentals

Variable according to phase of licence – click on link for details

Variable according to phase of licence – click on link for details

Guidance Notes on Licence Extension Framework Version:2016 Filesize 172.54 KB Download 798

Fiscal Terms

The Falklands fiscal system comprises:

  • a variable acreage rental
  • 9% royalty on production
  • 26% corporation tax on profits, with the usual allowances, etc.