Tuesday, February 09, 2010

Falklands War Shadow Over Oil Wealth.

1982 was an important year for me personally as it was when I sat my "finals", studying chemistry at Sussex University on the south coast of England; but for the nation and more globally it was the time of the Falklands War, which was waged in defence of British sovereignty over the Falkland Islands. I recall at the time there was some mention of "mineral rights", but can recall nothing more explicit than this or even where that allusion came from.

Many brave men lost their lives on both sides, as in most wars, or were terribly injured, physically and psychologically. The face of Simon Weston, who was severely burned, is a symbol of courage. He is a remarkable man and an inspiration to all who listen to him. He does not seem bitter.

Now it appears that some of that mineral wealth may exist in the form of oil. An oil-rig is due to arrive in mid-February, in microcosm of the fleet of ships sent to carry soldiers and munitions to wage war against the Argentines almost three decades past, but in this case to explore 100 miles north of the archipelago, where a geological survey has indicated there may be 60 billion barrels of oil.

The rig has been hired to the British "Desire Petroleum" company who will drill in the North Falkland basin and then lease it on to two other British companies, Rockhopper and Falklands Oil and Gas, and to the Australian BHP Biliton. The various firms will use the rig in rotation throughout this year. Shell put on hold its drilling projects in 1998 when the price of a barrel of oil fell to $12. Now with rising prices and peak oil on the horizon, meaning high costs and eventual actual scarcities, exploration projects of this kind are now looking once again viable.

Not surprisingly, Argentina is not a happy bunny, since it still claims sovereignty over the Falkland Islands which it calls the Islas Malvinas, having lost the war in 1982 and accuses the British of "occupation". It seems unlikely that there will be a second military conflict between the two countries but words of protest and defiance can be expected as the islands are a matter of national pride for Argentina. Given the waning in the North Sea fields, it is to be expected that Britain will look elsewhere for oil, including the region around Rockall, where there are sovereign rights.

The Falklanders will benefit to the tune of 20% of all profits and 9% of the royalties per barrel. The four main players have further promised substantial onshore investment which includes an overhaul of the main port at Port Stanley and building 350 new houses. There are 2,900 islanders there whose per capita income can be expected to rise appreciably, if even any substantial oil is recovered there, let alone 60 billion barrels. That said, not all are impressed by the potential loss of a traditional lifestyle based on fishing.

I shall watch this space to see if indeed oil is found and what consequences this may have.

Related Reading.
"Falklands oil prospects stir Anglo-Argentinian tensions." By Rory Carrol. http://www.guardian.co.uk/uk/2010/feb/07/falkland-islands-oil-britain-argentina

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