Fortress Falklands – Protecting the Oil

19 Sep

Last week’s news was that Rockhopper Exploration was preparing plans to take their recent finds near the Falkland Islands to a production phase by 2016. After an initial leap however, share prices fell back on concerns about quite how Rockhopper would find the $2 billion (£1.3 billion) necessary to achieve this. That, and worries in the City about Argentina’s reaction.

Argentina have been claiming the Islands since the 1940’s following Britain’s reassertion of it sovereignty way back in 1833 and, having attempted to take the Falklands by force in 1982, the money men are concerned that there may be another attempt in the future.

Now the Foreign and Commonwealth Office is to meet with leading investors in the City and offer reassurances that Britain will protect its Overseas territory in the South Atlantic and that they are fully committed to the Islands’ defence.

President Cristina Fernandez de Kirchner has ratcheted up the rhetoric over the past few years and is likely to make a lot of political capital out of the recent news, particularly as this is an election year.

The Foreign Office said, “The UK government has no doubts about the sovereignty of the Falkland Islands or the right of the Falklands people to develop their own natural resources, including hydrocarbons. It is longstanding UK government policy to support this, and we remain fully committed to the defence and security of all South Atlantic Overseas Territories, including the Falkland Islands”

Rockhopper has made no comment about the Government’s attitude towards its find, but has previously announced resource estimates of up to 350m barrels of recoverable oil; larger than anything found in the North Sea in more than a decade. Production plans are likely to involve a floating drilling and storage facility with, perhaps, an onshore processing plant.

UNASUR and MERCOSUR, both EU style organisations in the south cone, support Argentina’s call for negotiations over sovereignty and have previously said that they will deny facilities to any oil production taking place in the Islands. This may make extraction difficult, but not impossible.

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