AIM-listed FOGL said the oil and gas giant would boost its interests to 51%, from 40%, in two licences awarded in 2002 and 2004.

In return, BHP has agreed to reimburse FOGL with $US2.75 million of back costs, and will contribute towards the upcoming work program, including drilling two exploration wells.

“BHP’s decision to increase its interests in our licences further confirms our view that the South and East Falkland basins are highly prospective and have the potential for the discovery of significant volumes of oil and gas,” FOGL chief executive Tim Bushell said.

BHP’s decision to exercise this option follows the announcement of the initial farm-in arrangement in October, under which it has agreed to take over operatorship of these frontier licences.

The company’s entry as operator provided FOGL with its expertise in drilling in deepwater and sensitive environments as well as access to rigs, according to Bushell.

ASX-listed junior oil and gas explorer Global Petroleum owns a 14% shareholding in FOGL.