In 1982, Argentina and Britain fought a war over the territory of the Falkland Islands (or Malvinas Islands). This event caused about 1800 dead, many more wounded, several shipwrecks, and the typical destruction caused by violent conflicts.
HMS Coventry near the Falklands
Today Argentina's government invests a lot of energy to try to regain the islands. Many think that this is due to the economic problems facing the country, which are leading President Cristina Fernandez de Kirchner to focus the attention of the Argentine people towards an external problem.
Cristina trying to change the subject
This is similar to what was done when the military dictatorship invaded the islands, in those times the Argentina economy was in trouble just like it is today (I´m working on a theory which attributes Argentina´s irrational economic behavior to El Niño and other climate phenomena, but more about that later).
I´m pretty sure the defeat of Argentina in 1982 led to the fall of the military dictatorship. To fight and win that war cost the UK an enormous amount of money, as well as personnel losses during the war, and after they recovered the islands they have had a military base in the islands that costs around £ 75 million a year ($ 114 million , 86 million euros).
Popular opinion seems to be that the struggle between the two countries is due to the presence of oil in huge quantities in the marine territory surrounding the islands. However I believe that Falkland oil (or Malvinas oil ) is a fiction. It´s really interesting is to see how this legend was created and has been used to create problems between people.
We all know that if the islands are not worth much. The climate of these islands is horrible, cold, windy, that land is only fit to raise sheep.
Moreover, prior to the war the British had considered handing the islands to Argentina. This was stopped the political influence wielded by an outfit called "THE FALKLANDS COMPANY". That company raised sheep and was the largest employer in the colony. The other reason why the UK wanted the islands was pride. I do not think the British were that hot under the collar for Falklands oil. What drove Iron Lady Thatcher to go to war was pride.
So now let´s talk oil. By pure chance I had studied the potential oil fields of the whole region circa 1980 together with some colleagues. Eventually we came to the conclusion that there was oil. But we concluded that to find it in commercial quantities (that is to exploit it and make some money) would be quite difficult. It seems that other major companies came to the same conclusion, because I haven´t seen much effort by large multinational companies to drill around the Falklands since the 1980´s .
But the technology has improved, and the price of oil has increased tremendously. This explains why we hear a lot about the "enormous amounts of oil" around the Falklands in recent years. Interestingly the noise comes mostly from small businesses which have permits to explore for oil around the islands. Most of what we read is due to propaganda by those companies which need believers to buy their shares.
I mention a few examples, all articles I believe were written due to corporate propaganda:
The BBC in 2007: "The Falklands tell us they have billions of barrels of oil."
The Telegraph in 2009: "The oil you can find is worth 60 billion pounds."
Bloomberg in 2012: "Oil to be found by the four wells (that year) would be about 8.3 billion barrels."
Actually the only company which has found something is "Rockhopper Petroleum". It discovered oil in a reservoir called "Sea Lion". According to its owners, "Sea Lion" can produce 321 million barrels. Overall.
Now I want to show you a map without getting too technical.
South Atlantic map, showing the
oil basin in the ancient buried lake
This site is located in a relatively small basin located north of the islands, in water about 450 meters deep. This basin was a lake in a continent that was splitting into pieces. Pieces that would eventually become Africa and South America. And this means that when we consider the oil potential of the Falkland Islands we must focus on this extinct lake. Other areas will have some oil and gas, but do not have the properties to be produced under the conditions seen in the South Atlantic (it has large waves and strong winds).
I think that the Argentine government has used the islands to make trouble when they want the people to look beyond the problems they already have.
But from what I see the company Rockhopper struck oil for real.
Before starting another war over the islands, both peoples, British and Argentine, should consider the following information: Rockhopper has sold a fraction of the site, because it had no money to develop it. I consider this investment (what they need to invest to develop the field) to be at least $ 5 billion, and eventually possibly reach $ 10 billion. The development is very expensive because they have to use outer space type technology, a floating vessel connected by hoses to high pressure wells drilled on the seabed in very deep water, something like this:
Floating ship at the surface connected
with hoses to undersea wells.
Friends, Rockhopper sold 60% of the deposit to the company Devon for about $ 1 billion. And that tells us that Devon thinks that the site as a whole is worth just over $ 1.67 billion (divide 1/0.6).
After distilling all this information, "the huge oil fields of the Malvinas" are worth about $2 billion USD . Well, that´s what companies wanting to risk their cash think about it.
To the government it may be worth a bit more, although I can´t imagine why. But they ought to consider the cost of maintaining that colony. For example, the UK will spend $ 4.4 billion dollars maintaining its military presence on the islands for forty years.
Eventually they may find more oil, but it will not be in huge quantities. A sustainable fishing industry around the islands can be much more valuable. And that is not mentioned nearly as much as the Falklands (Malvinas) oil.