MercoPress. South Atlantic News Agency

Falklands’ oil industry has come of age moving from exploration to production stage, confirms Governor Haywood

Despite Argentina the oil industry has become fully integrated to the Falklands’ economy

For the first time the Falkland Islands have underlined the significance of the hydrocarbons industry as a fully integrated sector of the local economy as it effectively and successfully moves from the exploration to the exploitation stage with first shipments scheduled for 2017. At the same time it regrets that South American companies are not participating of the logistical opportunities because of Argentine interference.

The concept is part of the annual Governor’s address to the Falklands’ elected Legislative Assembly, the local version of State of the Nation, which also refers to the booming Islands’ economy and surplus budgets boosted both by fisheries good catch seasons and oil activity.

Regarding Argentine pressures on the economy and its inaccuracies campaign, the message read by Governor Nigel Haywood is enthusiastic about the reaffirmed support from the UK to the Falklands (the Queen’s speech opening Parliament), the recent overwhelming results of the referendum on the Falklands’ future and the Islands’ international public diplomacy strategy to explain to the world the Falklands’ right to self determination and the fact it is a democratic, modern community with a self sufficient successful economy.

The international strategy has seen the elected Members of the Legislative Assembly visit over forty countries with the Falklands message, and over a hundred journalists from twenty different countries have been invited to the Islands.

However the message also looks at the challenges that lie ahead: the ongoing efforts by Argentina to derail the Islands’ economy; to continue diversifying the Islands’ economy further developing fisheries, tourism and agriculture and not become oil-reliant, but most significant the recent census has revealed that the Falklands’ population is essentially static and ageing.

Follows the full address by Governor Haywood to the Legislative Assembly, Tuesday 4 June 2013

1. Mr Speaker, the past year has once again been interesting and challenging for the Falkland Islands. There are a number of reasons for this, some of which I will outline in this address. I will also set out how the Government responded to those challenges and I will outline its aims and aspirations for the future.

2. I will start by referring to the industry with the most significant potential impact on the Islands; the hydrocarbons industry. Those that have followed Falklands oil exploration over the years will recall that early predictions for success rates were perhaps 1 in 10. The three drilling campaigns to date have resulted in the operators declaring 7 discoveries out of 27 wells drilled. Planning is underway for oil production from the Sea Lion field, with a target date of late 2017. In addition, the 2012 drilling campaign was completed safely and successfully, with a gas condensate discovery and a gas discovery being declared by the operators. Furthermore, several large seismic studies have been and are being undertaken to identify further prospects. There is therefore a wealth of data to be analysed over the coming months and years.

3. Successful drilling campaigns over the last three years have proved that oil companies can work with remote re-supply. Nor have South American politics restricted their activities here. We are extremely grateful for the unequivocal support from the UK Government for the right of the Falkland Islands Government to license offshore exploration. Exploitation of natural resources is a fundamental right under the Falklands Constitution. Serious multinational oil industry players from the UK, Europe and the US have interests in the Falkland Islands, which are judged to be a good place to do business. Unfortunately, Argentine pressures are mainly affecting business opportunities for South American companies who are unable to take advantage of the new logistical opportunities that a successful oil industry will provide.

4. The impact that hydrocarbons may have on the Islands is of paramount importance to all of us. The abundance of wildlife, the pristine nature of the Islands and the way of life of the Islanders must all be considered. The development of the oil industry must be, and will be, carefully planned. We are migrating from oil exploration to oil extraction and significant progress has already been made. Relevant legislation has been reviewed and new and amended legislation is in the pipeline. Planning in all areas is progressing well and specialists have been commissioned to guide us in the process. Several reviews have already been completed and consultation is underway in several areas.

5. An Infrastructure Development Plan is being drafted which identifies more than 30 key policy decisions that will need to be taken to enable and support hydrocarbon developments, whilst ensuring that the developments are appropriate for the Islands. We now understand better what the likely impacts of oil will be on the economy and our society. Port facilities, land use, and other infrastructure issues that will be affected by long-term oil industry development are all under consideration.

6. The Government is working with the private sector to define policies that will encourage and maximise opportunities for local businesses to work with the oil industry. The prospect of oil provides a real opportunity to boost the economic prosperity of the Islands. However, the future of the Islands is by no means dependent on oil. The Government recognises the need to develop other economic opportunities. We will continue to invest, improve and diversify our economy in furtherance of continued financial self-sufficiency. I will speak more on this later.

7. There has been international interest in the Islands for many months now. This is partly the result of Argentine attempts to present historical inaccuracies and spurious sovereignty claims but also the result of positive action by MLAs and local people, supported by the British Government’s steadfast resolve. The profile of the Falkland Islands was raised even higher in the international community in March this year. A referendum was held to allow the Falkland Islanders to express their wishes on their political future. A resounding and overwhelming result was forthcoming. An unprecedented turnout of 92% of voters exercised their democratic right and 99.8% of them voted to remain a British overseas territory. A clear and unequivocal message has been sent to the international community in general and our neighbours in particular.

8. The referendum process, from inception to final count, was scrutinised by 12 international observers from eight countries, including some from South America. The observers confirmed that the referendum was open and fair and was conducted to the highest international standards; a reflection of the hard work put in by all those involved. The referendum also resulted in lessons being learned that will be applied to enhance our future democratic processes.

9. Whilst on the subject of the referendum, may I take this opportunity to thank all those involved, not just directly in the referendum process itself but also to those who provided accommodation, transport and guidance to the multitude of reporters and cameramen that descended on the Islands to witness history being made. By your actions you provided a visible demonstration of the friendliness and openness that typifies the Falkland Islands’ approach to visitors, providing a further message to the world at large.

10. To return to the economy, I am pleased to see continued optimism in the farming community despite recent reductions in wool and meat prices. Investment on farms continues and the Department of Agriculture has continued to work with farmers to achieve a balance between meat and wool income. FIMCo has more than achieved its targets for meat production and sales. The returns to farmers from meat production provide encouragement to continue the development of the meat side of their businesses and to diversify.

11. An ambitious new Action Plan has been agreed to implement the Rural Development Strategy, which was developed to encourage greater economic activity and population growth in Camp. Implementation of the Action Plan, incorporating a potential Rural Enterprise Zone will be pursued enthusiastically in the coming months. The Government has included significant funding in the budget for coming years to allow rural priorities to be pursued.

12. Tourism is an increasingly important part of the economy of the Falklands and will still be here long after the oil is gone. The Government facilitated the development of a Tourism Strategy, aimed at increasing the number of tourists and transforming the tourism industry. A key thrust of the Strategy is to increase the number of land-based tourists. To achieve the aims of the Strategy, the necessary infrastructure, quality tourism product and appropriate transport links need to be in place. Redevelopment of the public jetty and the relocation of the Museum will be completed for the 2013/14 tourist season in support of the strategic ambitions and in line with the Waterfront Masterplan. The potential for additional air links and increase in accommodation capacity will also continue to be pursued.

13. The current financial year is once again looking healthy for fishery finances. The second Loligo season in 2012 continued the good results of the first season with catches for the year reaching 70,900 tonnes. This is the highest catch since 1995. The Falkland Islands fishery is widely regarded as one of the best-managed fisheries in the world. A significant effort has recently been put into evaluating trawl net mesh sizes, through a series of research cruises. The aim is to develop a solution that will reduce discards of small fish and improve conservation of resources. This work is testament to our policy of responsible environmental stewardship and sustainable management of our natural resources. The long- awaited new Fisheries Building constructed by Morrison (Falklands) Ltd was completed in 2012, with the Fisheries Department moving from FIPASS in October. The grey containers on FIPASS are a distant memory for fisheries staff.

14. The Government has established the South Atlantic Environmental Research Institute (SAERI). His Royal Highness the Duke of Kent formally opened the Institute in November, during the official Royal Jubilee visit to the Islands. SAERI has established itself well and is bringing new science to the Islands, some of which is in collaboration with other overseas territories, such as the GIS project which is being developed in conjunction with St Helena.

15. In contrast to many other parts of the world, the Falkland Islands economy is booming and another significant Government surplus was evident last year. This was partly due to additional Government revenues from the hydrocarbons industry but it was also the result of an excellent year for the fishing industry. Illex squid catches were again high and the current season also looks promising. Whilst the Islands are not immune to the problems of the world economy, the Government has substantial reserves that are invested wisely and prudently.

16. The provision of effective, efficient and affordable healthcare can only be achieved by active management. Changing patient expectations, ever-improving clinical standards, technological advances and increasing clinical specialisation compound the challenge. A considerable number of clinical policies, procedures and explicit standards have been set, from which clinical performance can be assessed; more comprehensive data management systems are being developed to support this process. The health partnership that is being developed with a major NHS teaching hospital is an exciting development. This offers significant potential benefits in areas such as telemedicine, staff training and development and specialist support.

17. The Social Services section has had a number of significant challenges in recent months. As a result, a holistic review of our practices, policies and law relating to safeguarding children, which has been underway for some time, has been given additional impetus. This is designed to ensure that the interests of children in the Falklands will continue to be properly served. Recommendations from the review will be taken forward on a multi-agency basis, promoting a consistent and coherent approach across Government.

18. It is pleasing to note that there are increasing numbers of children coming into the education system with 44 children starting the new purpose built pre-school this year. Greater use is also being made of IT in education, particularly in Camp where pupil numbers are now at their highest for many years, resulting in the recruitment of additional travelling teachers and the opening of a new school at Port Howard.

19. Special Needs provision has been extended through direct recruitment and through links with UK providers. Work is ongoing to formulate a strategy that will facilitate coordinated special needs provision and enhance the lives of vulnerable people generally. It has also been encouraging to see a growing number of young people at the Training Centre undertaking apprenticeships and both in-house and distance learning courses.

20. At the Community School, a focus on self-evaluation has informed school improvement planning and the development of a long-term vision. With the arrival this August of a very experienced head teacher from the UK state sector, we should see a settled period of leadership and even more rapid progress in line with expectations.

21. In addition, it is noteworthy that there has been increasing stability of staff in the Education Service. More than 50% of teachers are now Falkland Islanders and the majority of UK-recruited staff are renewing their contracts. It is also heartening to see the success of the Government’s career succession policy, which has enabled local candidates to move into senior leadership roles in both schools. The recent appointment of local candidates to the Head teacher position at the Infant/Junior School and the Deputy Head teacher at the Community School are the most obvious examples of this but other local staff have also undertaken leadership training and are moving into positions of greater influence across the Education Sector.

22. This Government remains committed to good governance and reducing bureaucracy. The implementation of the recommendations in Irene Lucas’s 'Review of the Review' report continues. The recommended structural changes were implemented at an early stage, together with some of the procedural improvements (such as simplification of performance management). However, some of the changes, such as the development of a workforce development plan and definitions of roles and responsibilities are evolving over time.

23. This Government also remains committed to achieving progress on a range of issues and continuous improvement in the delivery of public services. A framework approach was developed, which sets out how Government services will be considered for outsourcing. The Government’s IT hardware and infrastructure maintenance has already been outsourced. The outsourcing of payroll services is at the concept stage and a number of approaches relating to other services (including post office, waste management, recycling, housing and certain PWD services) have been received. Business cases will be prepared and evaluated over the next few months. The private sector has engaged well with the process.

24. Whilst on the subject of outsourcing, the localisation of support services associated with the MOD presence on the Islands remains a priority, in line with the aspirations of the Economic Development Strategy. A Programme Initiation Document has been agreed between the Falkland Islands Government and the Ministry of Defence and a Localisation Commerce Board has also been established to ensure that the private sector is thoroughly engaged with the process. The process is designed to broaden further the economic base of the Islands whilst reducing costs of defence and freeing up limited resources. We recently saw the first success with the agreement for the provision of photocopier services to be provided locally. It is hoped that this will be the first of many and ‘in principle’ agreement has been reached on the localisation of air terminal services.

25. In addition, agreement has been reached with the Ministry of Defence for the provision of a Wind Farm to provide electricity at Mount Pleasant and Mare Harbour. This will provide financial benefits to FIG and the MOD and will result in a significant reduction in carbon emissions; a win-win and an excellent example of joint working for mutual benefit.

26. There are however difficult challenges that we will continue to face in the immediate and longer terms. The recent census has revealed that our population is essentially static and ageing. This in itself will result in challenges for the future and FIG must prepare to respond to such challenges in the coming year

27. The most important challenge is to make sure that a strong economy is maintained. Whilst the potential economic benefits that would come with oil production would be welcome the economy is not, and should not become, reliant on it. The Economic Development Strategy, or EDS, which was produced in partnership with local businesses, was designed as a roadmap to help in developing the economy. The EDS includes measures to develop existing industries such as fisheries, agriculture and tourism but also includes options for diversification into new sectors and for improving the general economic environment. The Government budget will again include significant sums to support investment in the EDS proposals.

28. The challenges we face also include dealing with continued attempts by the Government of Argentina to impede certain sectors of our economy. However, we are confident that these attempts will continue to fail and we have the full backing of the UK Government and international law. Such attempts are inconvenient and frustrating but our focus must remain on our own objectives and we should not be diverted by baseless attempts to derail us. We will continue to concentrate on our own development agenda.

29. The Falkland Islands Government has continued its international public diplomacy strategy. The Queen’s speech at the opening of the UK Parliament in May made it clear that the British Government will continue to support our freedom to determine our own political future. In addition, the Overseas Territories White Paper issued in June last year by the Foreign and Commonwealth Office sets out a number of areas for support and joint working. So far this year more than 100 international journalists from over 20 countries have visited the Islands and the members of Legislative Assembly have visited more than 40 countries in support of this effort. It is also noteworthy that many locals have been enthusiastically vocal in support, at home and abroad and young Falkland Islanders attended the Commonwealth Youth Parliament last year. The 43rd annual Commonwealth parliamentary Association Conference for the British Islands and Mediterranean Region was held in Stanley this year and was widely regarded as a great success with nearly 40 delegates attending

30. It has been, and will continue to be, a challenge for the Falkland Islands to resource this effort. Nevertheless, it is a challenge well worth pursuing. The Falkland Islands Government is devoting considerable resources undertaking its own public relations and will continue to do so, to make sure that the Islanders' voices are heard and their right to self-determination is promoted. We need to make sure that key messages about the Island's status, constitutional and legal position, and the overriding determination of the community to remain a British Overseas Territory are fully understood internationally. However, we also need to make sure that as many people as possible are aware that the Falklands have a modern community, a successful economy, a commitment to the highest levels of environmental stewardship and a huge tourist potential.

31. In addition to the headline services already mentioned, the Government has a number of other priorities for the coming months.

32. Last year the Government commissioned an independent review of immigration. This is intended to result in a completely fair, transparent and easy to follow immigration system being put in place, balancing the needs of a larger labour pool to facilitate economic growth with preserving the Falklands way of life. The appropriate balance needs to be struck between the two to ensure continued diversification of the economy and increased prosperity of the Islands. This review is nearing completion and its recommendations will be discussed in the near future.

33. Linked to this, in terms of modern economic development, we will see the introduction of a minimum wage in the Falkland Islands; a first step in improving employment laws to ensure that no one in work lives in poverty.

34. Localisation of Government jobs remains a priority. New promotion and recruitment procedures are being developed which will enable Falkland Island staff to be identified for development and promotion at an early stage, with the expectation that they will eventually fill senior posts. The Government budget includes £200,000 a year for the Succession Planning and Career Development schemes; very important extensions to the training budget. Unfortunately, the take up on these schemes has been limited so far and it will be a priority to review the eligibility criteria and scheme limitations, to ensure that training budgets can be appropriately spent. Notwithstanding this, a second leadership development programme was undertaken to supplement the 'Darwin 16' initiative. This was again a notable success and demonstrates the Government's commitment to succession planning and developing local talent.

35. The regulation of telecommunications has been continued and we now have an effective price control mechanism in place for the provision of telecoms services. Appropriate regulatory accounts are available to the Government and there is an internet performance quality regime in place. This work has resulted in lower and capped prices for broadband and annual increases in download limits and speeds. A dedicated regulator post has been approved in the Regulatory Services section, which will allow it to move on to reviewing performance of exclusive licence holders in preparation for licence notifications. Work can also begin on monopoly regulation. Government is also conscious of the need to regulate hydrocarbon exploitation and associated industries.

36. Transport links are an important part of the Islands' infrastructure; both internally and externally. The Government is investigating a number of possibilities for enhanced air links to improve accessibility and allow tourism and the economy generally to develop. Significant budgets have also been included for maintenance and improvement of the Camp road network.

37. Housing remains a strategic priority for the Government. 31 plots will be made available imminently as part of a major development at Sapper Hill; 10 of these having been earmarked for first time buyers at greatly subsidised cost. A further 19 plots are projected to be released in November this year. The development will eventually provide a total of 120 additional plots. Linked to this, a further 20 houses are planned to be built by FIG within the development to assist in meeting local housing needs and additional contract staff. The housing developments, together with the other planned and potential infrastructure schemes will place high demands on many support services, particularly in the Public Works department. We will need to ensure that services are robust, flexible and resilient to meet those demands.

38. The Government has committed considerable additional resources to strengthen and develop the system of justice within the Islands. Additional drafting resources have been engaged to assist in reducing the legislative backlog and assist in the development of new and improved laws. A new ‘Revised Laws’ project has been undertaken which will go back to basics to establish a baseline for current legislation and recommend a way forward for the future. This is a huge task but it is a significant step forward in ensuring that the Falkland Islands will have clear, complete and authoritative laws that are publicly accessible. In addition, an independent review of the Courts was recently concluded. A number of important recommendations aimed at improving the effectiveness of the Courts system will be considered shortly.

39. The Government's policy priorities for the forthcoming financial year will result in an ambitious legislative programme. This will include:

• Submission and implementation of a new Crimes and Criminal Procedure and Evidence Ordinances to update and clarify an important area of our legislation;

• Review and amendment of the Children Ordinance to ensure it is fit for purpose;

• Planning legislation amendments to deal with appeals and rights of the public to speak on planning matters;

• A new Prisons Ordinance to replace existing provisions that are badly out of date;

• A new Finance and Audit Ordinance to modernise financial and fiscal responsibilities and improve financial management;

• Appropriate legislation to implement the new regime for Members Remuneration;

• Legislation to establish a Statutory Tourism Corporation; and

• Further progress on Road Traffic Regulation.

40. In addition, further amendments will be made to the Electoral Ordinance (to improve the democratic process) and the Tax Ordinance (to clarify existing provisions where appropriate and implement any impending budget decisions). Every opportunity will also be taken to clarify and bring Falkland Islands' Legislation up to date.

41. Mr Speaker, as has been said many times before, Falkland Islanders are resilient and resourceful. They stand up for themselves and they are steadfast in their resolve. For nearly two hundred years they have been meeting challenges and they find practical and inventive solutions to those. The Falkland Islands have a modern society with modern expectations and ambitions. The community has high standards and high moral obligations. It deserves a modern, efficient and effective Government to work with. There are some serious challenges ahead, as there are in many parts of the world. However, the Government will continue to work to provide practical, imaginative and sometimes bold solutions so that first class services can continue to be provided. This approach will enable the Islands to continue to have the bright future that they deserve.