Falklands : Hydrocarbons Daily Record (29/08/06)
Submitted by Falkland Islands News Network (Juanita Brock) 29.08.2006 (Article Archived on 12.09.2006)
The Falklands have the time to wait and see if nationalisation or windfall tax or an alternative is the right way forward.
HYDROCARBONS DAILY RECORD: TUESDAY, 29 AUGUST 2006
By J. Brock (FINN)
At 1800 LMT on Tuesday, 29 August 2006 Light Sweet Crude fell .90 Cents to stand at $69.71 and Brent Crude fell .98 Cents to stand at $69.84.
TRENDS
Crude fell for the second straight day due to the downgrading of tropical storm Ernesto. It is expected to hit Florida on Wednesday as a tropical depression but it is not known if the storm will go over enough warm water off the eastern seaboard of the US to become a category 1 hurricane. The arrival of UN troops and Lebanese troops in southern Lebanon also seems to have a calming affect on crude prices today. Still to be jumped is the hurdle about Iran’s refusal to stop enriching nuclear fuel for energy generation. The Iranians want unconditional talks but the US is putting others under pressure to demand the cessation of nuclear fuel enrichment prior to any talks beginning. The deadline is on Thursday.
THE MARKETS
FTSE
At the close of play today, the FTSE 100 was up 9.71 points to settle at 5,888.30 and the FTSE 250 was up 40.16 points to end up at 9,531.80. FTSE Small Cap closed up 1.25 points to settle at 3,417.10.
DOW JONES AND NASDAQ
At the end of play today the Dow Jones Index gained 17.93 points or 0.16% to settle at 11,369.94 and the NASDAQ closed up 11.60 points or 0.54% to settle at 2,172.30.
DEVELOPING REGIONAL FACTORS:
(Bolivia)
As reported in HDR previously, unrelated Bolivian protests are threatening natural gas supplies to Brazil and Argentina along two pipelines. Protests come as Bolivian President Evo Morales' plan to nationalise the hydrocarbons industry begins to show signs of coming apart. In the latest action protesters shut off natural gas into Argentina on Monday night along a pipeline near the Bolivian border town of Yacuiba. Valves were opened again on Tuesday morning, Protesters want freer cross-border access for smaller-scale traders between Yacuiba and the Argentine town of Pocitos. The Bolivian government has sent a delegation to the area including the foreign minister, the minister of development and production, and high-level Hydrocarbons Ministry officials.
(Venezuela)
A top energy official said on Tuesday that Venezuela wants to have a majority stake in four heavy crude refining projects operating in the Orinoco Belt by the end of this year. As part of a campaign by President Hugo Chavez to boost government revenues from energy operations, Venezuela is seeking greater control over its oil industry. Companies like Exxon Mobil and Conoco, Phillip would transfer the joint ventures into state majority joint ventures like those in hydrocarbons legislation. President Chaves is due to finish his China trip later this week.
(Falkland Islands)
SHOULD FALKLANDS HYDROCARBONS POLICY REFLECT CURRENT TRENDS?
An editorial by J. Brock (FINN)
When hydrocarbons are finally extracted from beneath the North and South Falkland Basins the hydrocarbons industry could be far different operationally than it is today. We see the trend begun by Venezuela and Bolivia nationalising their hydrocarbons industries and in Ecuador raising “windfall taxes” to glean back profits made by increasing crude prices. Amongst third world countries with hydrocarbons industries this has proven to be a popular move with hopes of seeing better infrastructure, schools, hospitals and quality of life for the country’s citizens.
Where contracts have been successfully negotiated there has not been enough time, yet, to see any benefit from increasing revenue in governments’ coffers. Nationalisation, however, is a bitter-sweet experience with countries absconding with expensive hydrocarbons infrastructure thus nullifying benefits to international investors. Along with this comes a message, loud and clear, that it might not be wise to invest too heavily in infrastructure where the hydrocarbons industry may be nationalised.
For the Falklands, with a stable government and good forward planning, hydrocarbons goal posts wouldn’t be moved in the middle of the game. We benefit by being able to see if nationalisation of hydrocarbons works of if it falters. If the South American and Africa countries are on to something, no doubt this will be considered when contracts for hydrocarbons exploration and exploitation are negotiated here.
On our side, we have the time to see how well new governmental policies for hydrocarbons profits work for others before we have to consider whether to implement them in the Falklands.
Share prices at the close of play on Tuesday, 29 August 2006
Desire Petroleum Plc was up 1.00 points or 2.78% on the day to settle at 37.00.
Falkland Oil and Gas Limited (FOGL) ended up 4.00 or 3.64% on the day to stand at 114.00.
Rockhopper Exploration ended unchanged on the day to settle at 38.00
Borders & Southern ended unchanged on the day at 45.25
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