Rockhopper, the oil and gas exploration company has started working on its plan to find a partner to develop the oil field recently discovered near the Falkland Islands, and rumours yesterday suggested that Cairn Energy was taking a serious look at the pros and cons of investing in the South Atlantic.
With a $1.4billion war chest, the company is looking for new fields following the sale of 40% of its Cairn India business to Vendanta Resources. Small oil explorers such as Rockhopper often seek to farm out their stakes in early-stage projects to bigger groups. But with debt finance proving increasingly hard to come by, some are going further and selling themselves outright.
Any new business venture for Cairn would involve weighing up the political risks involved in investing in the Falklands, a British Overseas Territory claimed by Argentina. There are also business risks as Argentina is imposing an economic blockade of the Islands preventing shipping involved with the fledgling oil industry sailing through its waters, or using South American ports.
Argentina’s belligerent stance is supported, through rhetoric at least, by Chile, Brazil, Uruguay and Paraguay.
Rockhopper’s find is the largest so far with an estimated 500m barrels of oil available. With a market value of £780m, the Company needs a partner to help with the estimated $2bn in costs that it’ll take to develop the field.
The British presence on the Falklands dates back to 1766 and there has been a permanent settlement there since 1833. Argentina’s claims are founded on an assumed inheritance from Spain and geography. Argentines believes that as the Islands sit on the nearby continental shelf, that they belong to them. Argentine military forces attempted to take the Islands by force in 1982, but were badly defeated by the Task Force sent from the United Kingdom. As a result of this defeat, democracy returned to the South American State.