UK To Cash In On Falklands Oil Discovery

by Jason Gorringe, Tax-News.com,

24 February 2012

The governments of the Falkland Islands and the United Kingdom stand to benefit from as much as USD167bn in windfall taxes according to a new report on oil and gas deposits thought to lie in the maritime area surrounding the Falkland Islands.

The report, released by Edison Investment Research, is increasingly pertinent as tensions grow ahead of the 30th anniversary of the Falklands War, with Argentinian claims of increased militarization of the islands, and calls for the UK government to engage with Buenos Aires on sovereignty talks.

The report says: “Within the context of oil and gas, any ground-breaking discovery in the Southern Basin would radically change the islands’ royalty and tax revenues, potentially adding up to USD167bn over the years if the 2012 drill targets prove successful.”

Edison Investment Research's report concludes that 2012 will be a key year for the islands with two operators Borders & Southern (B&S) and Falklands Oil & Gas (FOGL) due to commence drilling two wells each in the first half of 2012 in the South Basin. The report estimates that deposits lying in this region could be up to ten times larger than those estimated to lie in the existing North Basin Sea Lion project - the first oil discovery in the area.

The Falklands Islands would be the largest beneficiary of the windfall, although the islands have agreed to share revenues with the United Kingdom, particularly as the island's defence needs are currently wholly-financed by the United Kingdom.

TAGS: tax | royalties | energy | Falkland Islands | United Kingdom | oil and gas | extraction tax | Argentina