Falklands : Falklands' Oil - Time to Defuse the Bomb
Submitted by Falkland Islands News Network (Juanita Brock) 04.12.2009 (Article Archived on 15.01.2010)
Oil boom, boom, boom has been touted throughout the media world since the transfer of the Ocean Guardian to the Falklands was announced. Like in 1997/8 stories abound about Falklands' oil bonanza and lots of money being earned by 3,000 Islanders. It’s a nice pipe dream but no thanks.
FALKLANDS OIL – TIME TO DEFUSE THE BOMB
By J. Brock (FINN)
Oil boom, boom, boom has been touted throughout the media world since the transfer of the Ocean Guardian to the Falklands was announced. Like in 1997/8 stories abound about Falklands' oil bonanza and lots of money being earned by 3,000 Islanders. It’s a nice pipe dream but no thanks.
Indications are that though the seismic looks outstanding there won’t be any hydrocarbons industry potential in the Falklands until the first exploratory well to show commercial quantities of hydrocarbons is plugged and abandoned. From this point it will take several years to thoroughly analyze data recovered from the exploratory drill. Even after analysis other factors will kick into place. Following are some of them in no particular order.
Logistics:
The cost of moving crude great distances could prove to be uneconomical. Other oil reserves are closer to market and are developed to a high standard of production. Due to the nature of the operation here it is likely that crude will go from wellhead to tanker with minimal infrastructure needed ashore.
Important crude reserves:
Compared with estimated reserves in the Falklands, others like those in Russia, Saudi Arabia, Iran, Libya, Canada and Venezuela have exponentially more volume. These reserves traditionally will be exploited prior to systematic crude production in frontier oil provinces. There are also nearer reserves than the Falklands to consider before exploiting reserves here.
Rig Availability:
During times of higher crude prices it is difficult to obtain an exploration rig, let alone one for production. If well-known reserves are being exploited the rig market is tight and with all the good will, one will be difficult – nearly impossible to obtain for drilling in a frontier province. Desire Petroleum had to wait years for a suitable rig to become available. Rigs are needed closer to markets. Exploratory rigs have also been used for production in certain cases.
Benefits of exploration:
Agreed, some temporary accommodation for crew transfers, engineering and haulage contracts will be signed. There could be increased business for food suppliers and other service industries. However, these business opportunities are only going to last for the duration of exploratory drilling – eight months or so – and are not expected to be permanent. It could be 10 years – even longer – before such opportunities arise again.
As for added money in our society – it could be a mixed blessing. When I came to the Falklands the most expensive houses were in the region of £17,000.00. In 1986 when the fisheries zone was set up around the Falklands that figure rose to approximately £25,000.00. With an average wage at the time at £75.00 a week, it put a first home well out of the reach of young people. At the moment land and houses still remain out of reach for young people. One can imagine the results if the hydrocarbons industry has a permanent foot in the Falklands.
While oil riches make interesting reading for some, it doesn’t help investors, who need good honest reporting about prospects. My advice is to hang on to the shares of Falklands’ related exploration companies but don’t expect to see millions of oil bucks until there is an industry in the Falklands to generate them and that could be years down the road.
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