The Faroe Islands, about half-way between Greenland and the U.k., are similar in many ways to the Falkland Islands southeast of Argentina.
Both island communities depend on sheep farming and fishing for survival. Both are the subject of territorial disputes involving the British government. And both hope to find oil in their waters.
The Falklands have the lead over the Faroes, having announced draft exploration and development terms (OGJ, Aug. 29, p. 36).
So far the Faroese have reached the initial exploration stage, with Western Geophysical Corp. now 4 months into a 2 year program to collect 12,000 line km of seismic data. This will guide a proposed offshore licensing round.
The territorial dispute over the Faroes has been more restrained than the Falklands argument. But it is more complex, involving two countries-Denmark and Britain-with oil industries and an islands' government tied to Denmark.
NEGOTIATIONS
Arni Olafsson, chairman of the Faroes Hydrocarbon Commission in Denmark's Ministry of Foreign Affairs, told an Aberdeen conference of current Faroese thinking.
Negotiations between Denmark, Britain, and the Faroes began in 1978 over boundaries affecting fishing rights. The countries reached an amicable agreement involving an area of seabed that no one claimed.
Recent discovery of major oil reserves west of U.K.'s Shetland Islands, the nearest part of Britain to the Faroes, has given negotiations a harder edge.
Latest in the string of meetings between British officials and representatives of Denmark and the Faroes was set to take place late in October.
If negotiations continue to drag on, Olafsson said, the International Court of Justice in The Hague may be called in to deliberate. But this could be costly and take more than 3 years.
"The period of uncertainty is not seen to have delayed petroleum developments on the Faroese shelf significantly," Olafsson said, "because the technological prerequisites for hydrocarbon exploration and production on the Faroese shelf have only become available recently."
WELCOME
Olafsson said the Faroes government's attitude is that the oil industry is a lottery and it is not wise to spend too much on a lottery ticket. Its petroleum administration will be kept small.
"Faroese government funds will not be spent on exploration activities," Olafsson said. "The industry will be welcomed to cooperate on exploration activities for mutual advantage."
The Faroes' Hydrocarbon Planning Commission has been charged with drafting a legislative framework for a first licensing round. It also will provide recommendations on taxation and community benefits from the oil industry.
The commission aims to have draft legislation ready before the oil industry has passed judgment on the islands' prospectivity.
If results of 1994-95 seismic surveys are looked upon by the industry as promising, a first licensing round may be contemplated in late 1996 or early 1997.
Copyright 1994 Oil & Gas Journal. All Rights Reserved.
