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Argentina plans oil exploration off Falkland Islands

21 December 2012

According to a report in the Daily Telegraph, the nationalised Argentinean oil company YPF, formerly owned by Spain's Repsol, is teaming up with Venezuelan oil giant PDVSA to explore the continental shelf around the Falkland Islands for oil.

If Argentina goes ahead with plans to explore for oil in waters claimed by the Falkland Islands, a confrontation with Britain seems inevitable
If Argentina goes ahead with plans to explore for oil in waters claimed by the Falkland Islands, a confrontation with Britain seems inevitable

"We discussed the need for oil and gas exploration in the territory and offshore areas, adjacent to the Falklands, but we have to analyse the costs and time," PDVSA president Rafael Ramirez Carreno told Argentine newspaper Pagina 12. He said he had recently spoken with the president of YPF, Miguel Galuccio, on this issue.

Mr Carreno said the prospective investments are the result of joint-ventures in Venezuela between the two South American countries.

However, he added that Venezuela is "proceeding with caution" after a warning by Repsol to companies that partner with YPF after the expropriation of its shares earlier this year. The Spanish company said it reserved the right to take legal action against any investor in YPF or its assets that had been illegally expropriated from Repsol.

Argentina announced in April it was taking control of YPF, seizing a 51% stake from Repsol, a decision supported by Venezuelan President Hugo Chavez.

This is the latest in a series of moves by the current Argentinean President, Cristina Kirchner, to rachet up tension over the Falklands on the 30th anniversary of the war fought by the UK and Argentina over the islands in 1982.

In the face of a campaign of harrassment against British interests in Argentina, the UK government tabled a White Paper in June officially pledging to defend the islands and declared there would be "no weakening" in the country's resolve over the Falklands.

According to Reuters, Britain summoned Argentina's ambassador to London on December 3 after masked men ransacked the offices of a shipping company in Buenos Aires, a move the Foreign Office alleged was aimed at deterring ships from visiting the Falklands. A number of cruise ships have cancelled planned visits to the Falklands under pressure from Argentina.

In April, Argentina sent a letter to 15 UK and US banks warning them of possible civil and criminal charges if they continue work with the five London-listed oil exploration companies involved in drilling in Falklands territorial waters.

The largest company involved, Rockhopper Exploration, sold a 60% stake of its Sea Lion field to Premier Oil in July in return for a $1 billion investment to bring the field into production in 2018. The prospect contains an estimated 320 million barrels of oil.

Noble Energy, a Texas based exploration and production group, is buying interests in licences held by Falklands Oil and Gas off the islands’ northern and southern coasts. Over the next three years Noble estimates it will be investing between $180m-$230m to develop its interests.

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