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Oil and the Falklands – the Saga Continues


Oil and the Falklands – the Saga Continues

Written by John Daly

Like some dimly remembered Gilbert and Sullivan operetta, pitting Hardy British tars against perfidious foreigners, the Falklands periodically recycles into the gaze of bemused international observers every decade or so.

Since the brief 1982 war between Argentina and Britain, the issue of sovereignty of the Falklands has lurked beneath the internationals diplomatic surface, an irritant but hardly threatening to reignite a new round of hostilities. Three decades on from that unfortunate confrontation the issue of the Falklands is again roiling Argentinean-British relations over the possibility that the archipelago contains beneath its surrounding waters something of value – oil.

British oil group Rockhopper Exploration has unveiled optimistic plans for a $2 billion oil infrastructure investment in the Falkland Islands announcing on 14 September that it expected to start pumping oil in 2016 from its four licensed Sea Lion concessions totaling 1,500 square miles, with a projected production rate of roughly 120,000 barrels of oil per day by 2018. Rockhopper Exploration said the fifth well in the Sea Lion complex “had found a high quality reservoir package and oil column.”

This roseate picture is somewhat clouded by several facts, including that currently Rockhopper Exploration has on hand a mere $170 million, enough to pay for two more scheduled wells. Nevertheless, Rockhopper Exploration shares, which have outperformed the European index of oil and gas companies by 14 percent since August, were up 1.1 percent in early trading after the company’s announcement.

A second element in this picture is a sobering fact that while both British and Argentinean companies have drilled a handful of exploratory wells in the water surrounding the Falklands, only Rockhopper Exploration has discovered petroleum.

And thirdly last but certainly not least is the issue of the islands sovereignty, contested by both Argentina and Britain for the last 198 years.

While various City pundits excitedly speculate that the Falklands is to become another North Sea, the above facts taken together indicates at the very least a far greater degree of risk in underwriting Rockhopper Exploration’s ambitious program.

So if the Falklands oil potential is so promising, then why are the international major oil companies not involved? The answer is in brief that they have looked at the islands’ potential and given a pass.

According to a US embassy cable dating from February 2010 and leaked last year by Wikileaks, “ExxonMobil International chairman Brad Corson told us he does not believe there is enough oil on the Falkland Islands continental shelf to be profitable, citing Shell’s earlier oil exploration attempts which they abandoned.”

Argentina is not taking the news lightly, declaring its intention following Rockhopper Exploration’s to both file an official complaint against Britain for oil exploration activities in Falklands/Malvinas disputed waters before the United Nations Decolonization Committee along with inviting the U.N. Special Committee of the 24 on Decolonization Chairman Francisco Carrion-Mena of Ecuador to visit Argentina to hold a meeting on the issue in Buenos Aires.

The Falklands now have the dubious distinction of joining the list of contested offshore maritime oil and natural gas concessions spewed by two or more countries.

These include a growing dispute in the eastern Mediterranean between Cyprus, Lebanon, Israel and Turkey, the final disposition of the Caspian’s offshore waters currently contested by Azerbaijan, Kazakhstan, Iran, Turkmenistan Russia and rising confrontation in the East China Sea over the region’s offshore waters which involves the Spratly island’s more than 750 islands, islets, atolls and cays, whose various portions of offshore waters are claimed by China, the Philippines, Taiwan, Vietnam, Malaysia and Brunei.

What makes the Falklands Argentinean-British dispute unique however is the fact that in 1980 to the countries actually fought a brief vicious war over the archipelago and its surrounding waters. At the time oil exploration of the Falklands waters had yet to begin, and the node and Argentinian writer Jorge Borges famously compared the dispute to “two bald men fighting over a comb.” The stakes are much higher now.

Common sense would seem to indicate that the best way for might be a possible joint venture between the two nations to explore their offshore waters oil potential hand, if any significant reserves are found jointly to develop them with an agreed-upon program of profit sharing, but given the increasingly strident claims sole sovereignty over the archipelago this seems increasingly unlikely.

If therefore Rockhopper Exploration’s drilling programs prove successful, a number of developments seem increasingly clear. First is that, depending on the political temperature in Buenos Aires, future activities may well need the protection of the Royal Navy.

Secondly is Latin America’s increasingly lining up behind Argentina’s claims to the islands, and Brazil recently stated that it would not allow British exploration vessels to use Brazilian ports to exploit any possible oil developments in the Falklands, Rockhopper Exploration will need to source virtually all of the necessary equipment from the other side of the Atlantic as well as possibly Britain, both major expenses for a company which states it has only $170 million of available cash. Furthermore should development go forward, then a total lack of access to Latin American hydrocarbon infrastructure support means that Rockhopper Exploration will probably be forced to use a floating production, storage and offloading (FPSO) vessel to store and transport its output.

Last but not least, the de facto boycott by Latin America of any future Falklands oil production means that the oil at the very least will have to transit South Atlantic before reaching potential markets, further increasing both development costs and shrinking potential profits.

In light of the above, a joint venture would seem to be the most common sense way to proceed, but given the rising jingoistic nationalism flaring over the issue in both London and Buenos Aires, don’t count on any time soon.

While in history is rife with examples of daring oil explorers making fortunes, the number of examples shrink dramatically when major oil companies give a pass on projected production and you future output is situated in a contested site which less than 30 years ago was a “hot” war zone.

By. John C.K. Daly of OilPrice.com

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It’s not the brutality that is ‘systematic’. It’s the lying about it

Robert Fisk: It’s not the brutality that is ‘systematic’. It’s the lying about it

Iraqi prisoners held by 1QLR in 2003 in a photograph shown at the inquiry

It was Baha Mousa’s dad I will always remember. On an oppressively scorching day in Basra, Daoud Mousa first spoke of his son’s death, telling me how the boy’s wife had died of cancer just six months earlier, how Baha’s children were now orphans, how – not long after the British Army had arrested Baha Mousa and beaten him to death, for that is what happened – a British officer had come to his home and stared at the floor and offered cash by way of saying sorry.

“What do you think I should do?”
Daoud asked me. Get a lawyer, I said. Tell Amnesty and Human Rights Watch. Let me write about it. When I called at the British base at Basra airport, one officer laughed at me. “Call the Ministry of Defence,” he said dismissively. He didn’t care.

I had spent years in Belfast, listening to the same kind of arrogant, vicious, indifferent reaction to the Army’s brutality. It was always the same. Terrorists. Terrorist propaganda. The extraordinary discipline of British squaddies under enormous pressure, etc, etc, etc. Then – when the game was up and the evidence too fresh and too overwhelming – I used to get what we would today call the “Abu Ghraib response“. A “few bad apples”. Always a “few bad apples”.

Hundreds of thousands of fine British soldiers behaving with exemplary courage and courtesy, in danger of their lives 24 hours a day – you will read this stuff in the usual newspapers today. They were the real victims of these “bad apples” – the actual victims, the 14 Catholic dead on Bloody Sunday in Derry, Baha Mousa in Basra, were the sub-victims who had somehow got in the way. They could be lied about.

Where did all these “bad apples” come from, I used to ask, along with their complacent, complicit officers? I recall the day the Gloucestershire Regiment ran amok in Belfast, smashing all the downstairs windows of a Catholic street just before they returned to Britain. Untrue, of course. Terrorist propaganda. Then a “few bad apples”. Was I on the side of the IRA? And so it went on. And on.

It wasn’t the brutality that was “systematic”. It was the lying that was systematic. In Northern Ireland, among the Americans after Abu Ghraib and Bagram and the black prisons and the renditions. Baha Mousa received 93 wounds. There was an inquiry, I was imperiously told. It was all sub judice.

Even the moment of Baha Mousa’s arrest has never been truly investigated. Colonel Daoud Mousa – for Baha’s father was a senior police officer, permitted by the British to carry a pistol and wear his blue uniform, hardly the father of a terrorist – actually saw his boy after his arrest, lying under orders on the floor of the hotel in which he worked.

The soldiers had found some weapons – perfectly normal in Basra where almost every household contained guns – but what the British didn’t want to talk about just then was that Baha had told his father that several British troops had opened the hotel safe and stuffed currency into their pockets.

That, Colonel Mousa believed, was the real reason he was killed. Baha had been a snitch. He was a witness to theft. The British officer in the hotel had told the colonel that his son would be returned to him safe and sound. Bullshit, of course. The 1st Battalion, The Queen’s Lancashire Regiment saw to that.

When I went to see one of Baha’s friends – newly released by his British killers – he appeared to have lost a kidney to the treatment he had received. He wept. His face was blue with bruises. Yes, this was my country which had done this. No comment. Call the Ministry of Defence.

Baha Mousa’s nose was broken. There was blood above the corpse’s mouth. The skin had been ripped off his wrists. According to his friend, Baha had been crying and pleading for his life from beneath his hood. “They gave us the names of footballers and cursed us with them as they attacked us,” he said.

The Brits did the same in Northern Ireland, I remember. Catholics would often tell me they were given the names of footballers before the beatings began.

A bit systematic, perhaps? “They were kick-boxing us in the chest and between the legs and in the back…” Baha’s friend said. “He kept asking them to take the bag off and said he was suffocating. But they laughed at him and kicked him more.”

And always there were screwball parallels from officers. We treat the Catholics a lot better than the French Paras treated the Algerians, an officer told me once near Divis Flats. We’re not as bad as Saddam. Nor Hitler, I’m glad to say.

My own Dad was a soldier, older than my Mum, fought in the Third Battle of the Somme, in the First World War, in 1918. He was in what was to become The King’s Regiment. Thank God it wasn’t The Queen’s.

The soldiers: Four men who ‘bear a heavy responsibility’

The 1st Battalion Queen’s Lancashire Regiment was handed control of Basra in July 2003. It was involved in tackling counter-insurgency and was praised for restoring order. QLR soldiers were at the centre of the first allegations of abuse against Iraqi soldiers by the Daily Mirror but the photos were withdrawn as fakes.

The inquiry identifies four soldiers who should “bear a heavy responsibility” for the death of Mr Mousa and injuries to nine other civilians.

Corporal Donald Payne was jailed for 12 months and discharged from the Army in 2006 after admitting inhumane treatment of Mr Mousa. Described as a “violent bully”, he conducted the “choir” which involved assaulting each man in turn.

Lt Craig Rodgers is held responsible for the breakdown in discipline including a “free for all” when soldiers took turns in kicking, punching, and slapping the hooded men. He did not face disciplinary action.

Major Michael Peebles was responsible for the welfare of the detainees but did not intervene. He was acquitted by the court martial.

Col Jorge Mendonca, the commanding officer, ought to have known about the violence and banned techniques being used. Charges against him were dropped at the court martial. The inquiry names 19 soldiers as responsible for inflicting violence. Those still serving could face disciplinary action; all could be subject to criminal or civil actions

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