Oil and the Falklands – the Saga Continues
British oil group Rockhopper Exploration has unveiled optimistic plans for a $2 billion oil infrastructure investment in the Falkland Islands announcing on 14 September that it expected to start pumping oil in 2016 from its four licensed Sea Lion concessions totaling 1,500 square miles, with a projected production rate of roughly 120,000 barrels of oil per day by 2018. Rockhopper Exploration said the fifth well in the Sea Lion complex “had found a high quality reservoir package and oil column.”
If this comes to full production,
If therefore Rockhopper Exploration’s drilling programs prove successful, a number of developments seem increasingly clear. First is that, depending on the political temperature in Buenos Aires, future activities may well need the protection of the Royal Navy.
Secondly is Latin America’s increasingly lining up behind Argentina’s claims to the islands, and Brazil recently stated that it would not allow British exploration vessels to use Brazilian ports to exploit any possible oil developments in the Falklands, Rockhopper Exploration will need to source virtually all of the necessary equipment from the other side of the Atlantic as well as possibly Britain, both major expenses for a company which states it has only $170 million of available cash. Furthermore should development go forward, then a total lack of access to Latin American hydrocarbon infrastructure support means that Rockhopper Exploration will probably be forced to use a floating production, storage and offloading (FPSO) vessel to store and transport its output.
Last but not least, the de facto boycott by Latin America of any future Falklands oil production means that the oil at the very least will have to transit South Atlantic before reaching potential markets, further increasing both development costs and shrinking potential profits.
The article proposes joint ventures between Argentina and the Falklands.
Would that even be considered by the Argentinian politicians?
