In spite of the occasional rumour that The Falklands have a lot of oil offshore (and that the tussle between the English and the Argentinians over them is about more than a few cold, sheep infested islands), drilling programs aren't coming up with much so far - Desire drill disappoints, Falkland explorers slump.

British oil explorer Desire Petroleum said it had found poor quality oil in the first well to be drilled in the Falkland Islands for a decade, sending shares of explorers in the islands lower.

Desire on Monday gave an initial update for the first well in a controversial drilling campaign planned for 2010 by British explorers in the Falkland Islands, off the coast of South America. Oil exploration in the islands has sparked protests from Argentina, which claims the British territory.

Shares in North Falkland basin-focused Desire were down by 44 percent at 0808 GMT after the company said logging operations at its Liz 14/19-1 well showed oil may be present in thin intervals but reservoir quality is poor.

The Times has an article on oil exploration in the Falkland Islands - Oil hunters invade the Falklands.

For two months a sky-blue tug boat has been puttering across the Atlantic dragging a 14,400-tonne oil rig.

It has been slow going — about 6mph — but this week the odyssey will end when it delivers the rig, called Ocean Guardian, to its destination just north of the Falkland Islands.

It will be a big occasion. Twelve years have passed since oil companies last went prospecting round the Falklands, 300 miles off the coast of Argentina.

All but one of the half-dozen wells that were drilled by Shell and others in the 1998 campaign showed signs of oil. In those days, though, the oil price was hovering around $10 a barrel, making it uneconomic to develop fields in such a remote location.

There was cheaper oil elsewhere. Talk of production also angered Argentina, which disputes Britain’s ownership of the islands, with protesters mobbing Shell forecourts.

More than a decade on, several things have changed. The oil price is seven times what it was — Brent crude closed at $70.55 on Friday. Drilling technology has developed in leaps and bounds. And it is becoming harder to find fresh reserves, pushing explorers into new regions in the hope that there may yet be another big find or two (see panel on right).

In the past few months investors have handed over more than £250m to four London-listed firms that are trying their luck in the Falklands.

“This is one of the most anticipated drilling campaigns of the year,” said Paul Wheeler, managing director at Jefferies International, the investment bank. “Last time they tried there were five wells that had oil or gas shows. The basins around the Falklands merit further exploration and this will be a fascinating few months.”

The region is one of a handful that has come back in vogue after years of being ignored. Later this year Cairn Energy, the FTSE 100 company, will drill the first new wells in more than a decade in the icy waters off the coast of Greenland.

The (UK) Daily Telegraph has an interesting article about the possibility of up to 60 billion barrels of oil off the Falkland Islands (something some conspiracy theorists used to blame for the tussle between Britain and Argentina over who owns the islands).

The inhabitants of the Falkland Islands are preparing for a South Atlantic oil rush which they hope will make them among the richest people in the world.

After 10 years of frustrating delays since oil fields containing up to 60 billion barrels of "black gold" were discovered off the islands, oil companies are planning to start drilling within the next 12 months. The move follows the conclusion of lengthy, but successful, tests by geologists and significant cash injections by two major oil companies which plan to bring rigs to the islands by as early as autumn.

The companies with licences to drill in the area met in Edinburgh on Friday to brief officials from the Falklands' government on their progress, and preparations are under way in the South Atlantic to ensure that the islands can cope with sudden wealth.

The successful extraction of oil could bring billions of pounds to the 3,000 islanders, in a cash bonanza similar to that enjoyed by Gulf states after the development of oil fields there. However, the effect would be magnified because of the tiny population of the archipelago - which was the subject of the 1982 war between Britain and Argentina - and its already high standard of living. The islands' GDP is £75 million, giving them one of the highest per capita rates in the world.

The capital, Stanley, is gearing up to become the Falklands' answer to the Klondike, with a redevelopment of its dockyard area and construction of 350 houses in the pipeline.

Officials are already drawing up a "wish list" of projects on which to spend their windfall, with Stanley's two schools and hospital expected to be among the first to benefit. There are also plans for a road-building project, and improved air links to the rest of the world and between remote settlements.

Jenny Cockwell, the editor of the islands' newspaper, Penguin News, said: "I can't see big skyscrapers springing up, but people would like to see things like a cinema and a bowling alley in Stanley."

The Falklands' government will receive 26 per cent of the profits from companies ­drilling for oil, as well as nine per cent royalties on every barrel sold. Many islanders will also be cashing in personally after investing in the companies searching for oil.

Mike Summers, a councillor and spokesman for the legislature, said: "We're talking about amounts of money that we have not been familiar with previously. But we're islanders. We tend to be pretty phlegmatic."

The Treasury has been eyeing up the expected revenues, but the Falklands' government insists it will not be able to "cut in" on any deal. The Falklanders do, however, want to contribute towards the cost of defending the islands.

Meanwhile the Argentine government, which still claims the "Malvinas", as it calls the islands, and their oil fields as its own, is also looking jealously at the situation. A spokesman said: "We reaffirm our backing for the legitimate rights of the Argentine Republic in the sovereignty dispute with Great Britain regarding the issue of the Malvinas."

Buenos Aires has accused London and the Falklands of reneging on an agreement in 1995 to co-operate over exploring offshore reserves, and of resisting its attempts to open talks on the issue. "The intransigence of Great Britain has not permitted that open and frank dialogue," the spokesman added.

The search for Falklands oil began in 1998, when a consortium of big companies drilled a cluster of six wells. Five showed the presence of oil, and one even brought it spurting to the surface.

It was estimated that the area might hold 60 billion barrels of oil - equivalent to the North Sea's estimated original reserves - all within the Falklands' "economic zone", which stretches 200 miles from its coastline.

Despite this potential, the companies concluded that the discovery was not commercially viable at that time, as the price of oil - at one point, just $10 a barrel - was too low to cover the high extraction costs.