MercoPress. South Atlantic News Agency

Australia's Billiton shrugs off Argentine legal actions threats

Resources giant BHP Billiton appears to have shrugged off the threat of legal sanctions by Argentina following the decision to acquire oil and gas exploration acreage off the disputed Falkland Islands according to reports in the Australian press

Argentina has condemned the deal and plans to write to BHP to say it faces bans in Argentina if it moves to explore under the newly acquired British exploration licenses. Earlier this year Argentina scrapped a Falkland Islands oil exploration accord with Britain, blaming Britain for unilaterally calling for tenders on oil exploration in the area. Argentina is now insisting that the long dispute over sovereignty of the islands be resolved before any oil deals are done. BHP ducked the controversy to focus on the prospects for finding oil. "We are very excited about this opportunity and we think it has good potential. It isn't appropriate for BHP Billiton to discuss the topic of sovereignty" said a BHP spokeswoman. BHP has no significant assets in Argentina, having sold its stake in the Alumbrera copper and gold mine in 2003. A spokesman for the Australian Department of Foreign Affairs and Trade said any decision by BHP to explore off the Falkland Islands was a matter for BHP. "It would be a commercial decision and (BHP) would need to weigh up the likely responses of the principals involved," the spokesman said. However he said Australia was encouraging Argentina and Britain to resolve the issue of sovereignty through bilateral talks, or through the United Nations if required. BHP's decision to explore so far south is the latest sign that the global hunt for oil and gas reserves is becoming more desperate. BHP's exploration venture off the Falklands will not only see it braving potential Argentine sanctions, but also high seas, freezing conditions and even the odd iceberg. By funding exploration costs over the next three years, including the drilling of at least two exploration wells, BHP will earn 40% of UK-based Falkland Oil & Gas Ltd's exploration licences off the Falklands. BHP also has an option to earn a stake of up to 65% in the prospects. Upfront, BHP has agreed to pay FOGL 10 million US dollars to cover historical costs. BHP will take over operational control of the licences from the start of next year. The FOGL licences cover nearly 73,000 square kilometers to the east and south of the Falkland Islands. But BHP's drillers will have to battle difficult weather conditions to operate in water more than a kilometer deep. Drilling will also be expensive, given the remote location and lack of infrastructure. Given "the tiny size of the Falkland Islands, with only 2000 inhabitants", BHP is expected to have to rely on its production hubs in the Gulf of Mexico and Australia to provide operational support and expertise.