STANLEY, Falkland Islands, March 17 (UPI) -- Oil explorer Falkland Oil and Gas said it identified a large undersea area in the South Falkland Basin where it hoped to carry out extensive drilling with the help of a deep-water rig.
Exploration for oil and natural gas by Falklands and British firms has heightened tensions between Britain, Falklands and Argentina over Argentine claims the islands are a disputed territory. Britain rejects the claim, pointing out the Falkland Islands are one of its overseas territories that has opted to stay under British sovereignty.
Falkland Islands were the scene of a 74-day war after Argentine forces backed by the country's military rulers invaded the territories in 1982 but were beaten back by a British force. The conflict led to more than 1,000 deaths among fighters and civilians.
FOGL, listed on the London Alternative Investment Market, said it identified large prospects for exploration in the South Falkland Basin and called its operations in 2010 a "landmark year" for the company.
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Despite huge media coverage and tens of millions of dollars in shareholder investments, exploration in the Falklands' South Atlantic waters has not produced commercially viable results.
FOGL drilled an exploration well in the eastern part of the basin without producing any commercially viable results.
The company now says things can undergo dramatic change when it commissions and deploys a deep-water rig. It said the unsuccessful Toroa well had provided it with "valuable information to plan future wells."
FOGL says it invested $21.8 million in its exploration program off the Falkland Islands in 2010, compared to $12.9 million the year before in operations that included $19.7 million spent on drilling the Toroa wildcat.
The drilling operation involved the participation of BHP Billiton in the first phase but the oil giant pulled out before the second phase could begin, handing over its share of the license area to FOGL.
The company is conducting a wider site survey to explore potentially new sites for further exploration.
Plans for new seismic surveys are also included in the company's projections.
FOGL says it has slashed its full-year, pre-tax losses to $3.7 million from 5.5 million a year earlier. Its cash balance totaled $69.8 million at the end of last year.
Most of the company's site surveys are being conducted under contract by Gardline Environmental Ltd., which has a vessel, Ocean Endeavor, on location in the South Falkland Basin.
FOGL is one of five companies involved in hydrocarbons exploration in the Falklands waters. The other companies are: Desire Petroleum, Rockhopper Exploration, Borders and Southern and Argos Resources.
