Port Stanley: The Next Dubai ?  

Posted by Big Gav in ,

The (UK) Daily Telegraph has an interesting article about the possibility of up to 60 billion barrels of oil off the Falkland Islands (something some conspiracy theorists used to blame for the tussle between Britain and Argentina over who owns the islands).

The inhabitants of the Falkland Islands are preparing for a South Atlantic oil rush which they hope will make them among the richest people in the world.

After 10 years of frustrating delays since oil fields containing up to 60 billion barrels of "black gold" were discovered off the islands, oil companies are planning to start drilling within the next 12 months. The move follows the conclusion of lengthy, but successful, tests by geologists and significant cash injections by two major oil companies which plan to bring rigs to the islands by as early as autumn.

The companies with licences to drill in the area met in Edinburgh on Friday to brief officials from the Falklands' government on their progress, and preparations are under way in the South Atlantic to ensure that the islands can cope with sudden wealth.

The successful extraction of oil could bring billions of pounds to the 3,000 islanders, in a cash bonanza similar to that enjoyed by Gulf states after the development of oil fields there. However, the effect would be magnified because of the tiny population of the archipelago - which was the subject of the 1982 war between Britain and Argentina - and its already high standard of living. The islands' GDP is £75 million, giving them one of the highest per capita rates in the world.

The capital, Stanley, is gearing up to become the Falklands' answer to the Klondike, with a redevelopment of its dockyard area and construction of 350 houses in the pipeline.

Officials are already drawing up a "wish list" of projects on which to spend their windfall, with Stanley's two schools and hospital expected to be among the first to benefit. There are also plans for a road-building project, and improved air links to the rest of the world and between remote settlements.

Jenny Cockwell, the editor of the islands' newspaper, Penguin News, said: "I can't see big skyscrapers springing up, but people would like to see things like a cinema and a bowling alley in Stanley."

The Falklands' government will receive 26 per cent of the profits from companies ­drilling for oil, as well as nine per cent royalties on every barrel sold. Many islanders will also be cashing in personally after investing in the companies searching for oil.

Mike Summers, a councillor and spokesman for the legislature, said: "We're talking about amounts of money that we have not been familiar with previously. But we're islanders. We tend to be pretty phlegmatic."

The Treasury has been eyeing up the expected revenues, but the Falklands' government insists it will not be able to "cut in" on any deal. The Falklanders do, however, want to contribute towards the cost of defending the islands.

Meanwhile the Argentine government, which still claims the "Malvinas", as it calls the islands, and their oil fields as its own, is also looking jealously at the situation. A spokesman said: "We reaffirm our backing for the legitimate rights of the Argentine Republic in the sovereignty dispute with Great Britain regarding the issue of the Malvinas."

Buenos Aires has accused London and the Falklands of reneging on an agreement in 1995 to co-operate over exploring offshore reserves, and of resisting its attempts to open talks on the issue. "The intransigence of Great Britain has not permitted that open and frank dialogue," the spokesman added.

The search for Falklands oil began in 1998, when a consortium of big companies drilled a cluster of six wells. Five showed the presence of oil, and one even brought it spurting to the surface.

It was estimated that the area might hold 60 billion barrels of oil - equivalent to the North Sea's estimated original reserves - all within the Falklands' "economic zone", which stretches 200 miles from its coastline.

Despite this potential, the companies concluded that the discovery was not commercially viable at that time, as the price of oil - at one point, just $10 a barrel - was too low to cover the high extraction costs.

6 comments

Anonymous   says 8:41 AM

Hi Big Gav, I have been a following the unfolding PO saga for awhile now and fully appreciate the ramifications that soon await us if the theory proves to be correct.

What sometimes throws me is when articles like this appear, because it raises further questions which I don't have ready answers to when people challenge the whole idea of PO.

For instance, would the bringing online of the equivalent of another North Sea oil field greatly postpone (by years) the arrival of PO? If so, by how long?

Also what about Iraq? I read reports that the country is sitting on massive reserves plus it still has vast tracts of land that needs exploring. Let's put the war aside for the moment and take a hypothetical stance. If Iraq was operating optimally what would its effect be on the global market? How much further out would PO be pushed then?

So, hypothetically, would the Falklands and Iraq combined significantly delay the arrival of PO?

Hope you can shed some light on these questions for me.

Many thanks for a great blog. I read it daily and value the articles that you supply.

Todd
(in London)

Hi Todd,

To put it in context, 60 billion barrels is 2 years of world consumption at present rates.

The oil, if it exists in this quantity. is offshore in a fairly hostile environment - it will be expensive to extract and the rate would depend on how complex the field geology is (which can often result in dramatically smaller recoverable reserves) much like the Jack and Tupi discoveries in recent years.

So this doesn't really change much (other than potentially making the Falkland Islanders very wealthy and disturbing the local environment considerably.

Iraq is a different story - I'd guess Iraq has around 320 billion barrels of oil (vs the 96 billion the ASPO estimates and the 112 billion that most official estimates claim).

This additional 200 billion odd barrels is equivalent to 7 years of world consumption - and it is light, sweet crude which would be very cheap to extract if the security situation changed (ie. we weren't trying to steal it via the oil law we want the Iraqi parliament to pass).

See my Iraq posts in the sidebar for the detail behind this - Control of Oil, How Much Oil Does Iraq Have, Greatest Prize Of All, Iraq Oil Law & Order in particular - or just search for Iraq and spend a week reading through it all :-)

This still doesn't have a huge effect on things PO wise when you look at the bigger picture - just pushes out the peak date 4 years or so and makes the downslope less steep.

I occasionally point out to people that if we use a fairly optimistic estimate - say the Oil & Gas Journal's 1.5 trillion barrels instead of ASPO's 900 odd billion barrels left - then we could maintain current levels of production for 50 years (before suddenly having none left at all).

The problem is that with the world population increasing to 9.2 billion or so by 2050, and with China, India and the others industrialising and eventually reaching OECD income levels, we would still have to cut our individual use of oil by around 70% - so there is a lot of work to do even under a fairly conservative scenario.

Cheers,
Gav.

Anonymous   says 9:42 AM

Many thanks for clarifying my questions by putting them into context.

The difficulty, I guess, for the many people who are not into PO in any meaningful way, is that the constant drip feed of stories about new oil discoveries helps to maintain a business-as-usual mentality.

As for me, I see that my difficulty is learning to let go of these oil 'lifeboats' as they drift by in the media and to not trust their business-as-usual assurances. I notice how hard that is at times for me - even with my level of PO awareness - because the world as I know it is the only world I have ever known: modern, energy rich, ever advancing.

PO asks a lot: new mindsets, surrendering to brave new ways of living, and embracing the unknown - certainly all good things for the soul! I am not shirking from the implications of PO but it's interesting to witness the tug-of-war that still goes on within me. On one side, wanting life to go on uninterrupted; and on the other, that the world is changing around me and I had better start changing too!

For those who are yet to become PO aware and for those who are key stake holders in maintaining the current paradigm, I imagine for them the shift will be doubly difficult.

All the best.

Todd

No worries.

One more point - I think we can supply all our energy needs from clean alternatives, so I don't buy into the whole PO collapse thing on the whole, though some places may have some difficulties navigating the change...

60 billion barrels of oil lie under the ocean around the Falkland Islands, say experts. Twenty years after the war in the South Atlantic, the islands have struck it rich. But who does the oil belong to? Argentina continues to eye the archipeligo even as British oil companies start moving in for the drill.
If the British geologists are right, this may be the right time to start drilling for oil in the Falklands. Whereas terrorist attacks on oil pipelines and pumping stations make the Middle East an increasingly unreliable permanent source of energy, terrorism is not a problem on the Falklands. Oil minister Rendell has, in fact, already granted drilling rights for large areas surrounding the islands. British oil companies plan to begin boring into the sea floor as early as next year. They calculate that the future wells will be profitable even at a world oil price of $25 a barrel.

CHeers,
Lan

Anonymous   says 9:44 PM

SHEC ENERGY CORPORATION of Saskatoon
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I have checked them out and they seem for real. I bought shares in the company given that if it is what it seems to be, the company will be a global game changer in CSP.

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