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Falklands’ oil offers an exit strategy from the dispute

Monday, September 10th 2012 - 00:47 UTC
Full article 47 comments
The Leiv Eiriksson oil rig currently operating to the south of the Falklands  The Leiv Eiriksson oil rig currently operating to the south of the Falklands

By Graham Bound - The discovery of a large field of natural gas beneath the seabed south of the Falklands received appropriate coverage in the UK press. Rockhopper Exploration’s agreement with Premier Oil, which is likely to involve an investment by the latter of up to £750m, has also been noticed.

In fact, I am downplaying this. I think a wide band of people in the UK have been simply amazed at the news coming out of the Falklands. I believe most media reading people in this country are now convinced that the Islands will soon become a hugely rich oil producing territory.

The commonly held view here is that the war of 1982 was all about oil, which I am sure most Islanders and Argentines know not to be true. But it would be right to say that oil is changing the dispute. The key to this is a surprising degree of corporate confidence and commitment.

There is no sign at all that Argentine threats have succeeded even slightly in dissuading rich oil investors.

And London is to thank for that. Had Whitehall issued anything less than cast-iron and categorical expressions of support for the corporations which invest there, BA’s threats might have succeeded.

A socio-economic impact study will soon tell us of the likely effect of an oil industry, and my guess is that both good and bad visions will come from it. But I don’t think a study is necessary to confirm that the discoveries of oil and gas are anything other than good for the political future of the Falklands. As long as wealth and strategic importance are promised, then no government will take a weak and compromising position on sovereignty.

Within a few years Argentina will realize that crude aggression and sanctions are a waste of time and only make them look immature. They will then begin talking more pragmatically about cooperation, and secretly request face-saving concessions. My guess is that the Falklands and the British Governments will feel secure enough to welcome this and satisfy Argentina’s need for an honorable exit from its hard-line strategy.

I would not like to guess what form a concession might take, but it is likely to be politically symbolic but economically significant.

In any case, it does seem to me that prosperity from oil and staunch support from Britain may enable us to close the book on tedious dispute that has stymied the Falklands and Argentina for more than six decades.(Penguin News)

By Graham Bound, London 

Financial Tags: RKH.

Top Comments

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  • mclayoscar

    Argentina's hardline strategy is not going to go away until this woman is gone. When she has gone then maybe the Argentine Government will soften its stance on the Falklands. She is has declared she is going to get the Falklands, she has no chance of getting them, she will not back down.

    Sep 10th, 2012 - 03:28 am 0
  • Marcos Alejandro

    Let's ask an investor:

    “Makes me wonder if its a waste of time investing in the Falklands. The Formula works out for shares in the Falklands so far as follows.

    Company :- fails to find oil loses 90% of share price
    Company :- Finds oil share price increase 100% then drops some 50% over time. finds more oil recovers 30% manages to get a farm in partner, price drops 50% and keeps droping.

    This is a good way to lose money at this rate Falklands will be pumping oil at a loss to its share holders. A company with oil in the ground should be like money in a Swiss bank account, yet Rockhopper is losing its value at over 2% a day. It will be taken over for peanuts at this rate. I can see it go down to £1.25p by the end of the year. If FOGL finds oil it may recover a touch, heaven help RKH if it doesn't”

    Sep 10th, 2012 - 04:41 am 0
  • Lord Ton

    Whistling in the wind there MoreCrap !

    Sep 10th, 2012 - 05:27 am 0
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