LONDON, April 23 (Reuters) - Explorer Borders & Southern says it has made
a 'significant' discovery of gas condensate off the Falkland Islands, adding to hopes the British-governed archipelago could be a source of lucrative hydrocarbons, but risking tensions with Argentina.
Argentina, which earlier this month sparked fury in Europe by moving to seize Spanish-controlled energy firm YPF, claims the remote south Atlantic islands as its own.
It has sought to disrupt the search for hydrocarbons there with legal threats and shipping curbs, in a year which marks the 30th anniversary of a war it fought with Britain over the islands it calls the Malvinas.
Borders & Southern said on Monday a well drilled on the Darwin prospect off the south coast of the Falklands found gas condensate, a liquid which often trades at a premium to crude oil.
'It is too early to give an accurate resource estimate, but this large simple structure ... is likely to contain significant volumes,' the company said in a statement.
Shares in the company dropped over 30 percent in early trade on disappointment that Borders did not find oil, the development of which is more straightforward. The stock jumped 90 percent last week on rumours oil had been found.
'The gas condensate find is not as exciting as a black oil discovery but it's infinitely better than a dry hole and a lot better than a dry gas discovery in terms of the commercial potential,' said Mirabaud Securities analyst Richard Savage.
'This is great news but not surprisingly you get all of this buy the rumour, sell the fact, especially if the fact turns out to be not quite what people were expecting.'
The discovery of more hydrocarbons in the Falklands comes at a time of intense Argentinean focus on its own oil and gas resources.
Earlier this month, the country controversially moved to nationalise oil firm YPF, seizing control from Spain's Repsol, in a move it hopes will help boost production.
In March, Argentina threatened to sue oil firms active in the Falklands and the logistical, financial and legal companies which support them, calling drilling in the disputed islands 'illegal'.
Britain's Foreign Office said in the last month it had written to businesses involved in Falklands exploration to reassurance them their activities were legitimate.
Analysts said more details of what Borders had discovered were needed to try to understand what sort of development might be needed to start pumping the gas condensate.
Borders said it would now carry out further tests on the liquid it had found.
Brewin Equity Research analysts pointed to the case of Cove Energy, part of a consortium that has found gas off the coast of Mozambique, which like the Falklands is a long distance from any potential large market for the gas.
Cove has made a series of finds which have been large enough to make building complex liquefied natural gas (LNG) facilities worthwhile.
Mirabaud's Savage said Border's Darwin find did not contain enough gas condensate to merit an LNG project by itself but said there was plenty of follow-on potential in the basin.
Two years ago, oil was found to the north of the Falklands by another British firm, Rockhopper Exploration, and the company is working to bring in a partner to help develop the field as part of a $2 billion project.
A second find in the islands, even though it is to the south, could make the logistics of developing the fields easier.
Borders & Southern is leading the charge to find oil off the south coast of the islands, with a second well slated to be drilled on the Stebbing prospect, before the rig goes to drill for Falkland Oil & Gas.
Borders & Southern said in September the Darwin prospect could contain an estimated recoverable resource of between 300 million to 760 million barrels.
(Reporting by Sarah Young; Editing by Mark Potter) Keywords: BORDERSANDSOUTHERNPETROLEUM/
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