Falklands : Should Falklands Hydrocarbons Policy Reflect Current Trends?
Submitted by Falkland Islands News Network (Juanita Brock) 30.08.2006 (Article Archived on 13.09.2006)
At the moment passing legislation for "windfall taxes" as well as nationalising assets and industries seems to be popular, but wait a few years to see the outcome.
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.
In Bolivia two protests have threatened to cut natural gas supplies and President Morales has admitted that the state owned hydrocarbons company has not raised enough money to buy 51% of the hydrocarbons business in his country – a sum of $161Million is needed and there are few willing –or able- in that country to come forth with the cash.
In Africa, all of a sudden, there are huge oil companies being accused of multi-billion Dollar fraud and they have been thrown out of the country. All of this makes investment in countries with new governments and/or unstable ones more difficult to justify.
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.
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