Friday, May 3rd 2013 - 03:29 UTC

Falkland Islands as oil-producing country: boon or blight?

For some, the prospect of the Falkland Islands becoming an oil-producing country creates exciting visions of opportunity, while for others it seems like a nightmare. What is certain is that oil, like sheep and fishing before it, will inevitably bring changes to both our wealth and our way of life.

Stephen Nicol of Regeneris forecast a short term population increase of 20%, not including temporary workers

With oil at 100 dollars a barrel in 2018, Falklands GDP, would leap from £140 million to just over £1 billion

In order to get a better idea as to whether these changes will be beneficial, harmful or a mixture of the two, a sizeable group of interested citizens met in the Community School last week to listen to a presentation by Stephen Nicol of the economics research analysts, Regeneris.

The likely impact of oil development is a big subject provoking many questions, to which some possible answers had already been provided by the socioeconomic survey commissioned from Plexus on behalf of Rockhopper Exploration PLC. However that study, which might reasonably have been expected to be partisan if not biased, dealt only with the predicted impacts of the involvement, of Rockhopper and their majority partner in the development of the Sea Lion field, Premier Oil.

Regeneris had been commissioned by the Falkland Islands Government (FIG) to take a longer and wider view. As Mr Nicol explained, his company’s brief was to understand the potential economic and social impacts on the Falklands arising from the Sea Lion development, but also to consider the impact of other scenarios involving additional exploration and development. The reason for this was to help FIG better prepare its response and strategies with a view to optimising positive impacts and minimising negative impacts.

To this end, since being commissioned by FIG, Regeneris had looked at what had happened in other parts of the world as well as holding detailed discussions with oil and gas companies with interests in the Falklands and reviewing a wide range of documentation from a variety of sources including the 2012 census. During a series of public consultation exercises arranged as part of two field work visits to the Falklands, they had involved over a hundred people in meetings and focus groups.

Mr Nichol presented four possible scenarios as a basis for illustration. Scenario 1 on which most of his speech was predicated was essentially representative of the present position in which two more exploration rigs may be expected in 2014 and 2015, with Premier oil beginning a process, hopefully leading to the extraction of the first oil from the Sea Lion Field in 2017.

The other scenarios, which envisaged more successful oil exploration leading to the development of two new fields around 2021 (Scenario 2), plus the exploitation of gas reserves, either off-shore (Scenario 3) or offshore (Scenario 4) were inevitably more speculative.

In his introduction, Mr Nicol said that he and his team had been on the whole surprised at the degree of public support for oil development that they had discovered in the Falklands. There would be considerable changes even as a result of the most modest scenario but most were similar to those predicted in the Plexus study.

One difference was that the number of jobs created, which might be expected to peak at around 350-400 in the years 2016 to 2017 would, at around 175 when the development phase entered what could be regarded as ‘a steady state’ be higher than that predicted by Plexus.

Effects on permanent population were rather harder to predict, given that most of the labour requirement would be off-shore and often of a temporary nature, but a peak of 190 housing units might be required. This should settle down to around 100 in the longer term, not counting a further requirement for accommodation for temporary workers and those in transit.

Assuming no further oil developments than those envisaged in Scenario One, there would be a considerably increased demand for construction skills during the period of infrastructure provision, but this would settle down from 2020 onwards to a requirement for about 175 jobs, divided more or less equally between onshore oil and gas activities, supply chain activities, public sector increases and increased activity in the private sector.

Among the necessary activities which will be required for ‘first oil’ production in 2017 and will lead to a short-term increased labour demand, are the construction of a temporary harbour with the work beginning in 2014 and the harbour entering into operation in 2016.

Regeneris forecast a short term population increase of 20%, not including temporary workers, which should peak in 2016 and 2017 before reducing to a ‘steady state’ figure of around 10% (230) thereafter.

While the preservation of the historic look and feel of Stanley had been expressed to Regeneris as one of the population’s main concerns, Mr Nicol seemed to be of the opinion that once an initial period of increased activity around FIPASS was over and the principal industrial area had been moved to the other side of Wireless Ridge with the opening of the new port, Stanley would easily absorb the required increases in population size. A larger population, coupled with much increased government revenues could also lead to the provision of a better level of services and facilities for all.

As is mentioned elsewhere, these quoted increases in economic activity relate solely to those derived directly from oil and do not include what could be the considerable impact of government investment elsewhere in the economy.

The Regeneris report does not predict major changes brought about in Camp due to the first scenario. On the positive side, an increased Stanley population will inevitably bring with it increased opportunities for the sale of agricultural products, primarily meat, while on the negative side Mr Nicol ventured that government might find itself having to find ways to counteract an increased ‘Stanley pull.’

An exception, if that is the option chosen and all agreements and planning processes have been completed, is the possible assembly of flow-lines on shore, somewhere in Camp. This would need to be completed by the end of 2016, during which year also a two-year program of drilling in the Sea Lion Field would begin to enable extraction to begin at the planned time in 2017.

To the surprise of some members of his audience, who later commented on it, Mr Nicol’s illustration of activity during his first scenario had work on the proposed new permanent port not beginning before an uncertainly predicted 2017, with a presumably equally uncertain predicted finishing date in 2019.

 

According to this scenario, if crude oil which is currently worth between $92 and $100 per barrel were to be worth $100 a barrel in 2018, the Falklands GDP, which is at present around £140 million would have leaped to just over £1 billion and would not return to current levels till around 2045.

On the other hand, should the oil price defy present predictions of increase and fall to $80 per barrel in 2018, Falklands GDP would increase to around £675 million, returning to current levels around 2039.

Currently FIG revenue from oil-related activity stands at around £40 million, but according to the Regeneris Scenario 1, this figure would leap to just over £150 million from royalties on the first two years of production. The onset of corporation tax revenues in 2020 should take FIG combined revenue from tax and royalties up to a stratospheric £400 million, given an oil price of £100 per barrel.

While decreases begin almost immediately after this peak, current levels of oil-related revenue are not resumed until 2048. FIG annual average estimated income over this thirty-year period is estimated at a healthy £150 million at £100 per barrel (£110 million at £80 pounds per barrel).

As Mr Nicol pointed out, these figures are based solely on the Scenario One level of oil-related activity and do not take into account any increased revenue to FIG which would be expected to flow from other economic activities that such vastly increased levels of income should make possible.

These figures may seem mind-boggling to readers old enough to remember the early pre-fishing licensing ‘eighties when FIG annual revenues, apart from aid, totalled about £4.5 million, however they are as nothing compared to the FIG income levels to be achieved and maintained should other oil fields be developed. (PN)

 

39 comments Feed

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1 Marcos Alejandro (#) May 03rd, 2013 - 03:57 am Report abuse
“hopefully leading to the extraction of the first oil from the Sea Lion Field in 2017”

2017 is now hopefully?
Meeting video
www.youtube.com/watch?v=O1CfI5uh02U
2 LEPRecon (#) May 03rd, 2013 - 06:39 am Report abuse
@1 Marcos

Jealous much?

Nothing in the oi business is certain, anyone with half a brain knows that.

It just kills you to know that one day the Falklands Islands will become rich and prosperous, doesn't it?

Never mind you can continue to support Argentina a failing 'never was' country mired in its own 'fictional' past.

A country that has huge natural resources that should make it ne of the richest countries on the planet, but is run by a bunch of selfish gangsters who spend all their time in office stuffing their own bank accounts with US dollars, whilst diverting the gullible masses with the fictional past.

The problem is that one day the masses will stop being so gullible and will rise up and remove the gangsters.
3 Escoses Doido (#) May 03rd, 2013 - 06:42 am Report abuse
It's going to happen, and argentina will eventually turn up on the FIG's doorstep 'cap in hand' asking forgivness, and if there's any chance of the FIG putting some buisness their way.

Wait and see.
4 DanyBerger (#) May 03rd, 2013 - 07:33 am Report abuse
”FIG annual average estimated income over this thirty-year period is estimated at a healthy £150 million at £100 per barrel (£110 million at £80 pounds per barrel).”

ha ha ha A supermarket in Argie land will make more revenues than that.

Are these people living in planet earth?
5 Clyde15 (#) May 03rd, 2013 - 10:59 am Report abuse
#4
ha ha ha A supermarket in Argie land will make more revenues than that.
Of course you are talking of Argentinian pesos, or will you be using the Basutoland mung bean for your currency by then.
6 M_of_FI (#) May 03rd, 2013 - 11:24 am Report abuse
@4 Dany

Yes, in the grand scale of things, £150m is not a great deal of money. But for 3,000 people, that is a huge sum.

£150m (Oil) + £35m (standard FIG revenues) = £185m

£185m / 3,000 (FI people) = £61,000 per capita - That is a lot of wealth to spread around! Lucky Falkland Islanders!

On a similar point, Argies please notice who commissioned the report and who will benefit from the oil and gas windfall... hint...the Falkland Islands. Not 'England' as you people say.
7 Faz (#) May 03rd, 2013 - 11:27 am Report abuse
DanyBerger there is a difference between turnover of a supermarket which probably makes about 3 percent profit and £150 million every year shared out between 3000 people.

You are really stupid... We call you a dolt!
8 Steuart (#) May 03rd, 2013 - 11:34 am Report abuse
Use the money wisely and generations to come will thank you
9 DanyBerger (#) May 03rd, 2013 - 01:08 pm Report abuse
Oh! boys that is a miserable amount of money.

As I said before a supermarket in great Buenos Aires make more money that the entire FI.

They get average 10.000 client per day. can you see how insignificant you are?

Now please rise some money to buy a pair of socks for Dick because the last time was really an embarrassment when visit Willy Hague.
en.mercopress.com/data/cache/noticias/39288/0x0/the-empty-chair.jpg
10 Benson (#) May 03rd, 2013 - 01:24 pm Report abuse
Danny really has no concept of per capita does he.
11 andy65 (#) May 03rd, 2013 - 01:31 pm Report abuse
@DanyBerger Instead of talking stupid go and think how you can make the life and living standards of the millions of Argentines that have to live on less than $7 a day over 10 million people better
12 Anglotino (#) May 03rd, 2013 - 01:33 pm Report abuse
Benson

Dany believes Kenya, Peru and Argentina have lower rates of poverty than Australia.

Says it all really!
13 M_of_FI (#) May 03rd, 2013 - 01:39 pm Report abuse
You are an endearing person, aren't you Dany? Well, that insignificant amount of money will transform the Falklands with its tiny population. If £25m per annum from Fisheries provided the Falklands with free health and education up to university level (and many other benefits), can you imagine what a £150m per annum would do for us?

While Argentina struggles with inflation, exchange rates, militant unions, media controled by the government, large national debt, an increasing autocratic leadership and mass corruption, the Falklands has secured its economic future for 25+ years.

While you boast about Argentine supermarkets and the revenue they generate, I would much rather be in the Falklands, than the economic mess that Argentina continues to plunge itself in.

I look forward to more of your inane comments.
14 Conqueror (#) May 03rd, 2013 - 02:01 pm Report abuse
@13 DB is “selective”. Read the article. It says “Falklands GDP, which is at present around £140 million would have leaped to just over £1 billion”. That's not £150 million, it's an increase of approximately £860 million. But DB isn't allowed to read that bit! Are argie supermarkets making much money with the government-imposed price freeze? What happens when the price freeze ends? The supermarkets set out to recover the money they lost. So inflation will jump and argies will starve. It's all fun in argieland. As you move into winter, argies will be turning to salads.
15 Think (#) May 03rd, 2013 - 03:10 pm Report abuse
Article says….:

”According to scenario 1, if crude oil were to be worth $100 a barrel in 2018, the Falklands GDP, which is at present around £140 million would have leaped to just over £1 billion and would not return to current levels till around 2045.

I say….:
Regeneris and Mr Nichol’s *U$S100* a barrel ”Scenario 1” is set to start working in the Lords Year of 2018….......until 2045......

That is 5 (five) years from now…………and for almost 30 years in the future.

I wonder if Regeneris and Mr Nichol’s ”Scenario 1” included a bit of history about oil prices for the English Kelpers……

Any English / Kelper in here knows what the median world oil price has been in the last 40 years (1970 – 2011) ????

U$S 100.00 per barrel???.................... Nope….
U$S 80.00 per barrel??..................... No, try again…..
U$S 32.50 per barrel?..... Juppppp, thats right…..: U$S 32.50 per barrel.
www.wtrg.com/oil_graphs/oilprice1970.gif

”Prices in the mid $30s seem exceptionally low by today's standards. However, when the current President of the United States took office the price was $35.00 per barrel. By the end of 2009 prices had doubled bringing the average for 2009 to $56.35 or $57.00 in 2010$.”
www.wtrg.com/prices.htm

Brainwash anybody?
16 Clyde15 (#) May 03rd, 2013 - 04:10 pm Report abuse
#15
If they had to eat seaweed then I am sure they would rather do that than have anything to do with Argentina.

Nobody has a clue as to what the oil market will be in 5 years time. Their scenario is equally valid to yours.

I understand that your job is to throw the worst possible light on any news about the Falklands which you consistently do.
However, that does not make it true.
17 Think (#) May 03rd, 2013 - 05:03 pm Report abuse
(16) Clyde15

You say...:
“Nobody has a clue as to what the oil market will be in 5 years time. Their scenario is equally valid to yours.”

I say...:
Nobody has a clue as to what the oil market will be in 5 years time, that's correct.....

But their “Scenario” is not at all equally valid to mine......

Firstly, because I haven't presented any “Scenario” just true, verifiable facts about oil price variations.......

Secondly, because I don't posess the necessary English Chuzpah to sell a “Scenario” assuming stable oil prices for the next 35 years to them squatting Kelpers.......
18 Clyde15 (#) May 03rd, 2013 - 06:30 pm Report abuse
#17 Not worth a reply.
19 Think (#) May 03rd, 2013 - 06:41 pm Report abuse
TWIMC

Meanwhile, in the City of London……………… the shares of Rockflopper Exploitation fall to their lowest level since the “Sealion Discovery” in May 2010…………..

Brainwash anybody?
20 slattzzz (#) May 03rd, 2013 - 08:43 pm Report abuse
@19 stink................. jealous anyone?
21 Islander1 (#) May 03rd, 2013 - 09:06 pm Report abuse
Think- are you in ther same brainshortage as marcos? - I thought better of you. RKH are no Longer key Players - Premier Oil are.
Quite normal to me for companies - during periods of inaction - like RKH - to have a depressed share value.
Maybe wait and see what starts to happen late 2014 when drilling etc restarts in thier areas.
22 José Malvinero (#) May 03rd, 2013 - 09:08 pm Report abuse
“A country,” says the writer. jaaaaaaaaaaaaaaa!!!!!
23 Anglotino (#) May 03rd, 2013 - 09:21 pm Report abuse
Did Think just attempt to downplay the price of oili n the future by quoting a median price based on the past 43 years?

An median oil price that included 1970...... back when the world had only 3.7 billion people and China's GDP was comparable to Italy?

Income might be lower than estimates, but it will still be income.
Income the islands don't have now.

Estimates are estimates. So the price of oil extracted from FI might be an estimate, but it is a guarantee that Argentina won't be earning the royalties.
24 malen (#) May 03rd, 2013 - 11:20 pm Report abuse
If he is asking, it is a blight
25 reality check (#) May 04th, 2013 - 06:11 am Report abuse
If it is, it's a blight that YPF would dearly love to catch!
26 DanyBerger (#) May 04th, 2013 - 07:55 am Report abuse
So taking a more real scenario based on statistics from the past FI will not have even a GDP of 300m.

Lest say 3 Arg supermarkets, ha ha
27 Monkeymagic (#) May 04th, 2013 - 08:41 am Report abuse
Anglotino

Yes, Think really did try and use the median price since 1970. What a dumbass.

But there again, it's typical Argie economics. Think calculates the cost to buy food and fuel for his home based on median price since 1970, and then spends the rest of his cash..then he realises that he's run out of money as it was a ridiculous analysis given rabid inflation and grossly changed macroeconomics.

Think now has a massive shortfall so he borrows from a third party (but doesn't change his analysis). The next month he has another shortfall and can't make his loan repayment, so he claims he was “tricked” into the loan and the fuel and food costs are because of the “boogie man”. he then refuses to pay his loan.

By the third month, he's lost his job, can't afford the fuel or food irrespective of the median price, can't afford the loan or the default on the loan, so then makes up a fictitious claim on his neighbours house and sets fire to their front lawn.

What a loon...but typical Argie.
28 Think (#) May 04th, 2013 - 11:34 am Report abuse
(26) DanyBerger

You say….:
So taking a more real scenario based on statistics from the past FI will not have even a GDP of 300m.

I say:
Not quite so, Mr. Berger…….
Based on a more realistic scenario, taking into account statistics from the past and the cyclical nature of oil prices; the English Pirates Oil Adventure in the South Atlantic has a very good chance of being a “No Starter”……
Leaving them Islands with their current GDP of ~£140 million …..
That will be the moment when Argentina will tighten its grip on the tourist and fishing industries that provide nearly 70% of the above mentioned GNP….
29 surfer (#) May 04th, 2013 - 12:02 pm Report abuse
Argentina is out of this game, they blew it, a paper Tiger now, bunch of failed pirates with empty threats.

Work already started on infrastructure in the Falkland Islands, Premier working on FPSO options, all good for 2017.

Well Argentina with inflation at 30% and increasing, peso at 10cents and decreasing, YPF importing more than ever, pissing off Brazil and Uruguay pulling investments out, etc, etc... What will THEY be looking like in 2017?
30 Pete Bog (#) May 04th, 2013 - 11:13 pm Report abuse
@4
“supermarket in Argie land will make more revenues than that.”

Really?
31 DanyBerger (#) May 05th, 2013 - 09:08 am Report abuse
@Pete Bog

Yeah really “Pete” supermarkets sector total revenue in 2011 was USD 22bn in Argentina.
And they invested annually in between 300 to 500m USD.

www.americaeconomia.com/negocios-industrias/argentina-ventas-en-supermercados-aumentaron-277-en-2011

Carrefour $17bn revenue in 2011
Coto $11.7bn revenue in 2011
www.lanacion.com.ar/1440833-invertiran-1500-millones-las-cadenas-de-supermercados
32 Think (#) May 05th, 2013 - 09:17 am Report abuse
TWIMC

Seems to be, that quoting the “Median Oil Price” of the last forty years is too much for some of our posters…..
Apparently, the Young Ones can’t “Think” so far back in time as the Vietnam War…..

Let’s take the average Oil Price for the last twenty years then....., shall we?
www.ioga.com/Special/crudeoil_Hist.htm
1992: $19.25
1993: $16.74
1994: $15.66
1995: $16.75
1996: $20.46
1997: $18.97
1998: $11.91
1999: $16.55
2000: $27.40
2001: $23.00
2002: $22.81
2003: $27.69
2004: $37.41
2005: $50.04
2006: $58.30
2007: $64.20
2008: $91.48
2009: $53.56
2010: $71.21
2011: $87.04
2012: $84.46
Average oil price 1993-2012 = $37,98
Juppppp.. NOT $100.00.. NOT $80.00….........… Just $37,98-

And we are, as the Yanks so elegantly put it, in the midst of the Freaking Fracking Oil Revolution…..
One Billion GNP in Malvinas on 2018…., my left foot…..
Brainwash anybody?
33 lsolde (#) May 05th, 2013 - 10:42 am Report abuse
Whatever, Think, whatever.
But you & your failed country won't get your greasy hands on any of it.
So why are you worried.............er, interested?
Jealous, maybe?
34 Think (#) May 05th, 2013 - 11:25 am Report abuse
(33) Chère Isolde

My hands are not greasy!!!

As a matter of fact their long sleek fingers and their strong, dry, assuring grip have been praised by females of four continents.....
;-)))
35 lsolde (#) May 05th, 2013 - 12:30 pm Report abuse
You're making idle boasts now, Cher Think.
And you still won't get OUR oil or OUR country.
36 Think (#) May 05th, 2013 - 12:32 pm Report abuse
Yes, we will ...
37 lsolde (#) May 05th, 2013 - 09:53 pm Report abuse
Nyet...
38 Monkeymagic (#) May 06th, 2013 - 10:10 am Report abuse
Poor old “Think” has confused himself quite a lot in this thread hasn't he?

Firstly, his claim to have pleasures women from four continents is clearly a typo. He meant to say that he has pleasures four incontinent women.

Secondly, his “Argie” economics. The global oil price (Brent crude) has more than trebled over the past decade, and held that increase for 5 years plus. “Think” believes this is an indication that the oil price is bound to crash over the next ten years and return to pre-2003 prices. You can see how these Argies get themselves into these massive debts that they default on with dickishness like that....

Thirdly, he thinks Argentina will “get their hands” on Falklands oil. That made me laugh a lot, they we offered a share and Nestor ripped it up...ho hum..all gone, Cape Town here we come. However, ifArgentina should like some cheap gas around 2025 after yet another default, an economic crash, and the Kirchners just another “wasn't me” group to blame in Argiehistory...no problem.

Interestingly, even using just scenario 1 (not “thinks” Argie economics, or in fact the likely significant increase in Brent crude between now and 2030), from just Sealion alone (using deidreoverdovers plan of just spending the interest), the FIs will have a large national reserve then Argentina by 2035.....how fucking funny is that??
39 Raul (#) May 09th, 2013 - 05:00 pm
Comment removed by the editor.

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