A column published on Saturday in the British newspaper The Telegraph proposed that the UK Treasury take half of the tax revenues generated by the Falklands oil industry, in exchange for increased defense spending in the South Atlantic and a diplomatic push against Argentina.
The proposal, by economics columnist Matthew Lynn, would alter the existing arrangement under which the archipelago retains all of its energy revenues, on the basis that it is a territory required to be self-financing apart from defense costs. Lynn argues that this arrangement “clearly cannot hold” in the face of Argentina's hardened position, and contends that a territory of a few thousand people would scarcely know what to do with the full revenues the industry could generate.
The column appeared three days after federal judge Mariel Borruto, of the Río Grande court in Tierra del Fuego, issued an injunction ordering Rockhopper Exploration and Navitas Petroleum to refrain from drilling, installing infrastructure or beginning hydrocarbon extraction at Sea Lion. The measure stands until an environmental impact assessment is completed before the Argentine authority, and requires the companies to report within ten days on the project's status, its contractors, financial backers and insurers.
The suit was filed in early September by the La Plata-based Centre of Former Combatants of the Malvinas Islands and an association of environmental lawyers, on environmental, sovereignty and procedural grounds. London does not recognize the jurisdiction of Argentine courts over the archipelago, which limits the ruling's practical reach. In 2015 a court in the same province ordered the seizure of some US$156 million, which was never enforced.
Rockhopper and Navitas said in a joint statement that their licenses were lawfully granted by the Falklands government and that they do not anticipate any material effect on the project or its timetable, with drilling due in early 2027 and first oil in 2028.
Lynn puts Sea Lion's reserves at 900 million barrels and their value at between £5 billion and £6 billion, adding that initial estimates for developments of this kind typically multiply. The column does not identify a source for those figures. The most recent independent report on the project, by Netherland, Sewell & Associates, works from a long-term Brent assumption of US$76 per barrel and puts the capacity of the first two phases at 55,000 barrels per day, with a further 125,000 to be added by a second FPSO.
The column describes the Argentine campaign in terms of bullying and calls the sovereignty claim spurious.
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