JOINT DECLARATION OF 27 SEPTEMBER 1995

COOPERATION OVER OFFSHORE ACTIVITIES IN THE SOUTH WEST ATLANTIC

COMMENT - Agreement - Side Letters - Proclamation

The Joint Declaration on cooperation and exploitation of possible offshore oil and gas deposits between Britain and Argentina, backed by the Falkland Islands people, is a major advance in relations, despite Argentina's persistent refusal to abandon its sovereignty claim to the Islands.  In Argentina the reaction to the agreement was contradictory.  President Menem claimed it was a step towards the acquisition of Argentine sovereignty of the Falklands, whereas the previous president, Dr Alfonsin, said it was a step away, an acknowledgement of Falklands sovereignty over the Falklands.  

The Chief Executive of the Falkland Islands Government, Andrew Gurr, hailed the Declaration as a good deal for the Falklands and for Britain, and also for Argentina, its neighbours Brazil and Chile, and for the oil companies.  He acknowledged that it was a surprise breakthrough, due in large part to hard work on the part of the British Foreign Office, saying "The agreement very clearly leaves aside the sovereignty issue under the longstanding 'umbrella' framework.  The agreement has nothing to do with that."

"It has made quite a difference to the attitude of oil companies.  Some were positive about our intentions previously, but the agreement reduces the risk for them, and so their response has been very favourable....  Previously neither country would have dared to offer licences in the Special Area, and now both can be involved in doing that so both gain.  Argentina will also gain possibly from oil bases in Patagonia.  Some of their neighbours will gain.  Brazil and Chile have good technological expertise in oil exploration.  I am sure some companies will be looking to them.  And they will be more likely to cooperate as a result of the agreement.... Chile needs the employment, and Petrobras in Brazil is one of the world's leading deep sea drilling companies."

When asked what advantages the agreement held for the Falkland Islands if oil is found, Mr Gurr said "The exploration will be more thorough than it might otherwise have been.  The whole purpose is to find out if oil is there.  I made the point at the public meeting in Stanley that it is not good saying 'Let's leave it there.  It will always be there if we want it later.'  The world is searching for alternative sources of energy.  Who knows one may be discovered and oil may have had its day in a few decades.  It is pointless leaving it in the ground in those circumstances.  We need to know whether it is there.  We need to secure for ourselves a future which involves a degree of security.  At present we are dependent on Britain for that security.  The discovery of oil will enable us to emerge from that tutelage."

Mr Gurr acknowledged that the agreement with Argentina made the South West Atlantic a more stable area than the Middle East, saying "More than eighty per cent of world oil supplies are in the Middle East, which is not the most stable area.  People were saying in recent days in Washington, it is good to have a virgin basin.  It is one of the last major areas of the world of this kind of structure which is available for exploration.  To have that now in the Western Hemisphere is of great interest to American companies in particular."

When asked how optimistic he was about the prospect of oil being discovered in Falklands waters, Mr Gurr said "It would be foolish for me to comment on that.  Some of the geologists and oil companies are optimistic.  That's their business.  They take the risk, not me.  Oil companies are very positive.  We have had fifty to sixty companies attending our seminars, asking very intelligent companies.  We have had individual meetings, and the companies have had meetings with both Spectrum and Geco-Prakla, the seismic sub-contractors.  The companies may be purchasing more data and analysing it.  Some are setting up teams and talking about consortia.  It has been an exceptional start.  If we had written a script as to how we wanted it to go, we could not have been quite as optimistic as it has turned out."

On the subject of Argentinian participation in oil exploration within Falklands waters, and Argentina's threatened imposition of a three per cent tax on oil companies, he commented that several Argentine oil companies had expressed an interest, saying "We have made it very clear we welcome Argentine participation within the 49 per cent level laid down.  No Argentine company may form a majority of any consortium nor be the operating company even if they are in a minority in a consortium....  There is controversy [about the proposed tax].  In my view, it is the same as France taxing Britain on oil from British waters.  It is adjacent, but it does not belong to them.  If they get away with it, it is up to them and the oil companies.  Both the Falklands and UK Governments do not agree with that tax."

When asked about the economic benefits oil might bring the Falklands, Mr Gurr said "It might become the richest per head though Saudi Arabia and Kuwait are extremely wealthy and have large reserves.  It may well be considerable wealth could be our biggest problem in future.  Most people feel that is a problem they would like to handle.  I personally would not be so optimistic about that.  We need to be very careful.  We hear Alaska is considering withdrawing subsidies it gives to individuals because oil may become exhausted."

Mr Gurr concluded by assessing the possible environmental impact of a new oil industry, "The environmental impact I am sure we can manage successfully.  Even environmental campaigners like Greenpeace, I think, agree on that.  We are more at risk from spillage from tankers going past us from elsewhere than we would be from our own industry.  We have drawn up rigorous guidelines and legislation.  The Greenpeace attitude is they don't think oil should be extracted in the first place because of damage to the environment.  Theoretically one must be forced to agree with them on that.  But, I heard in Washington a comment of the former Governor of Texas, John Connolly.  When someone asked 'Doesn't pollution smell awful?', he replied: 'Yes, it does.  But it smells better than poverty'!"

[With grateful thanks to the 64th edition of the Falkland Islands Newsletter published by the Falkland Islands Association in November 1995 which provided the source material  for this article]

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