Crude behaviour

A new discovery of oil off the Falkland Islands hardens Argentinian resolve 

The price of crude has been on a substantial slide since last summer, losing more than half of its value since June 2014. Oil firms have had to pull back on expansion plans and slash job projections. Oil-dependent economies, such as Venezuela, have been ravaged by the crash of the black stuff.

But such is the aura around oil that it still has the power for that instant spark, no matter how difficult the extraction or how poor the oil and no matter that there may be more dampening announcements to come after the fanfare has died down.

(A case in point for this final example would be the recent row-back from the claim that up to 100bn barrels of oil could be sitting near Gatwick Airport to the south of London.)

At the start of this month, three small UK oil firms revealed a find at their ‘Zebedee’ well in the North Falklands Basin. Although there was a muted response as far as shares go, and despite the current problems for oil companies caused by the low price of the stuff, Buenos Aires bristled when news came through.

The mythical draw of black gold provokes wide-eyed excitement when discoveries of fields are announced. It does seem that part of the Argentinian reaction follows this line of thought. The area around the archipelago has been charted by prospective drillers regularly over recent years, but this latest British find has stoked the possibility of a new industry in the South Atlantic.

Buenos Aires seems to have less of a problem with the fishing carried out by Falkland Island fleets but this exploration and exploitation of oil has enraged the Casa Rosada.

The Argentinian government sees the Islas Malvinas as constituent parts of the South American nation. To this end, any investigation or development of natural resources around the islands is seen as an illicit territorial encroachment.

On an international diplomatic level, it disagrees that the exploration of natural resources should be taking place where sovereignty is disputed. But is there a dispute when only one party feels wronged?

There may be no feasible extraction of workable crude for many years to come, but this announcement still feels like a slap in the face for the fumbling Argentinian economy.

Plummeting opinion polls for outgoing president Cristina Fernandez de Kirchner could be roused by an oil rush. But she can only look out east over the ocean uneasily, and has resolved to support legal action against the companies involved.

The fate of the islands has also been mentioned in the UK general election campaign, with the governing Conservative party committing in its manifesto to “uphold the democratic rights of the people of Gibraltar and the Falkland Islands to remain British, for as long as that is their wish.”

And late last month the British defence secretary said the UK government would invest £180m over the next ten years on improving and expanding the military presence in the islands.

The Falkland Islanders are sure to be feeling chipper and can picture an expansion of their own economy with all the industry and income that would accompany the development of the new finds, knowing that the mother country is still, for now, standing behind them.

The Argentinians believe the bolstering of soldier numbers by the British is another illegitimate move in the martial arena to protect unlawful actions in the civilian sector.

While the fog of diplomatic mistrust and the anxiety around military maneouvres shroud the windy shores of Tierra del Fuego and Stanley, there is to be no sharing of resources in those deep southern waves.