By Abid Ali
March 9th, 2010
How do you benefit from a country's economic boom? One that could propel a small island in the South Atlantic into a top 10 oil exporter.
The best way is to invest in the companies that trade or operate there. One such company is England-based Desire Petroleum. It’s drilling of the coast of the Falkland Islands right now to see if it can strike oil. If you had bought shares on this day (9th March, 2009) a year ago – you would have quadrupled your money from 25 pence to 104 pence. Not bad.
But you could not have missed the controversy? Argentina wants the islands back, I wonder why?
According to Reuters Breakingviews,
Surveys suggest the waters off the Falklands may contain 60 billion barrels of oil, worth $4.7 trillion at current prices. That makes the oil rights highly valuable to the islands, whose government agreed a favorable regime with a 9 percent royalty; to Britain as protector; and potentially to Argentina, which claimed the Falklands since 1820.
Just consider for a moment – suspending all reality about how royalties are charged – 9 percent of $4.7 trillion: $423 billion!
Both nations, struggling with mountains of debt, could do with a slice of that money. It would mean Argentina's President Cristina Fernandez, who called drilling near the Falklands "robbery", wouldn't need to raid the central bank's funds to repay debt.
Both nations, you could say went to war in 1982, for a lot less when the economy of the Falklands was a few sheep.
Argentina would love to have a Brazil-style oil-fueled economic bonanza.
Don’t forget Britain’s windfall could be even more as the likes of Desire pay tax.
No doubt Britain would like to receive something back for defending the rights of the Falklanders. Hopefully Britain will do a better job then squandering the legacy of North Sea oil.
Before we get ahead of ourselves Britain’s Foreign and Commonwealth Office says:
"The natural resources of the Falkland Islands belong to the Falkland Islands. The Falkland Islands Government has previously said that it would want to pass some of the revenues to the UK in return for the support that the UK continues to give to the Falkland Islands. No decisions have been made at present. The UK and Falkland Islands Governments will resume discussions on the issue of revenues if hydrocarbons should be discovered in commercially viable quantities."
Desire says its interest are purely in oil and did not want to get involved in the diplomatic spat. I'm afraid it already has.
Talk about provocation, red rag to Argentina’s claims, the first British ship to visit (or discover, depending on your perspective) the islands in 1592 was, you guessed it, Desire.
http://blogs.aljazeera.net/business/2010/03/09/hands-falklands
