March 22nd, 2012
Econintersect: Thirty years ago Argentina invaded the Falkland Islands which lie some 290 miles east of that South American country in the South Atlantic Ocean. After two months of an undeclared war Argentina was forced to withdraw. The island territory has been a self-governing overseas territory of Great Britain for the past 180 years, but Argentina continues to claim it is part of that country. The 3,000 residents of the islands are British citizens and the official language is English. Tensions have been on the rise again recently because of oil exploration in the waters north of the Falklands and proposals to extend the exploration to the ocean south of the islands. Click on map for larger image.
Follow up:According to an article in Resource Investing News, exploratory drilling north of the islands has found oil reserves of approximately 450 million barrels, while the yet unexplored area south of the islands may hold 4 to 5 billion barrels. The types of royalty and tax income figures being mentioned are as large as $167 billion in a best case scenario. That is more than $55 million per resident.
Of course this windfall would be a boon to Argentina which had (2011) a national budget of $141.1 billion and a deficit of $5.4 billion. The Falklanders, however, do not seem likely to feel any inclination to consider a courtship by Argentina and Great Britain has sworn to provide military defense for the islands. The territory’s main source of revenue comes from the selling of fishing licenses for the fertile surrounding waters, most famous for squid. According to The Guardian, about 50% of the calamari consumed in southern Europe comes from the Falklands. However, fishing is in decline and the revenue from pumping oil would be welcome as a replacement at low levels of removal, while creating a very rich society of 3,000 with larger amounts of oil.
Within the last month, Argentina has refused docks at Ushuaia to cruise ships that had called at the Falklands.
Falklands Dispute Sparks Concerns in Oil Market (Adam Currie, Resource Investing News, 20 March 2012)
Falklands 30 years on: oil dream could end days of squid and subsidy (Andy Beckett, The Guardian, 20 March 2012)
Hat tip to Options Girl.