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http://www.guardian.co.uk/business/blog/2012/feb/16/talk-falklands-oil-boom-tensions-anniversary
Talk of Falklands oil boom heightens tensions as war anniversary nears
Up to 8.3bn barrels of oil could be up for grabs, ramping up tensions as the 30th anniversary of the war between the UK and Argentina approaches
A banner outside Government House in Buenos Aires reads ‘Brits get out of the Malvinas’. Photograph: Enrique Marcarian/Reuters
Tensions are rising in the Falkland Islands as the 30th anniversary of the war between Argentina and the UK approaches. Even Sean Penn has waded into the simmering row over sovereignty of the islands, calling Britain’s presence in the Falklands “colonialist, ludicrous and archaic” as he criticised Prince William’s deployment there.
Growing talk about an oil boom in the contested islands doesn’t help.
Some 8.3bn barrels of oil are thought to be up for grabs in the waters around the Falklands. That compares with UK proven reserves of 5.6bn. However, some believe the prize could be much bigger: some estimates put it at up to 60bn barrels. That dwarfs the 21bn barrels thought to be remaining in the UK sector of the North Sea.
Analysts at Edison Investment Research said: “None of these figures have of course been proven, although we do know that Sea Lion is already approaching the size of the single largest field discovered in the UK North Sea this century, namely the Buzzard field where total recoverable reserves of more than 550m barrels have been estimated.” Sea Lion, estimated at just shy of 450m barrels, is the largest oil discovery in the Falklands so far, and is owned by UK-listed explorer Rockhopper.
An oil boom is set to transform the Falklands. A report by Edison, Kicking up a Storm in the South Atlantic, says the islands could reap up to $180bn (£115bn) in royalties and tax as oil companies get drilling. Good news for the UK government, but Argentina’s president, Cristina Fernández de Kirchner, must be fuming.
This year oil companies start drilling in the southern basin of the Falklands. Ian McLelland, one of the Edison analysts, told the Guardian that the total 60bn barrel estimate for the region “doesn’t seem like an unreasonable estimate” given that four wells in the south alone are expected to yield 7.8bn barrels and “there are dozens of fields”.
Every time drilling results from the four wells are released – they will come 45 to 60 days apart – tensions are bound to rise. The first results are expected in mid-March. “The potential prize from tax revenues could weigh heavily on [UK-Argentina] relations if 2012 exploration is successful,” the Edison report says.
In the Falklands drilling race, Rockhopper has been leading the way in recent years, undaunted by initial setbacks.
But this is just the start. The southern basin could prove much more lucrative. The Edison analysts say that the largest prospect in the southern basin, Loligo, contains estimated resources of 4.7bn barrels, making it the largest drill target anywhere in the world in 2012, and over 10 times the size of Rockhopper’s Sea Lion.
The report concludes: “In 2012, the focus shifts firmly to the southern basin explorers where success for Falkland Oil and Gas Limited or Borders & Southern Petroleum will be a game changer for the region. Rockhopper and Falkland Oil and Gas offer the most compelling upside for investors. The biggest winner, however, could be the Falklands itself, with a near $180bn potential prize in royalties and tax on the horizon if 2012 drilling proves successful.”
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