Desire hit by latest Falklands oil setback

Desire Petroleum, the British oil and gas explorer, dealt investors a further blow yesterday by revealing that it has so far failed to find any hydrocarbons in a further drilling hiccup in the Falklands.

The update on the Jacinta Prospect well in the North Falkland Basin comes after Desire said an "oil discovery" at the Rachel North well, unveiled to a fanfare in early December, had turned out to be water just days later.

After that episode, Desire plugged and abandoned the Rachel North well in order to focus on the Jacinta Prospect.

But having drilled to a depth of 1,313 metres with no success, Desire said yesterday that the Jacinta well, in which it has a 100 per cent interest, would now have to be drilled to the planned total depth of about 1,670 metres.

Yesterday's admission sent Desire's shares sliding 18p, or almost 30 per cent.

Following the update on Rachel on 6 December, when Desire said the hydrocarbons found there were "residual, and the mobile fluid is water", Stephen Phipps, the company's chairman, commented: "It is extremely disappointing that the wireline logs and fluids sampling have dashed all the earlier promise of this being Desire's first oil discovery in the North Falkland Basin." That statement nearly halved the oil company's share price, knocking 66p off it on the small-cap AIM market.

Desire has drilled four exploration wells in the Falklands this year, but has yet to find any oil or gas there.

Retail investors, including many veterans of the Falklands War, account for nearly three quarters of its shareholders, and the prospect of oil being found off the islands has raised tensions with Argentina once more.