Falklands braced for oil bonanza

THE 2,000 Falkland Islanders are bracing themselves for a new invasion - of oilmen, possibly followed by unimaginable wealth. Geological studies have shown the islands' waters could contain reserves 50 per cent larger than those in the North Sea, and the Port Stanley government is pushing through laws to regulate its exploitation.

Last week, draft legislation based on UK laws was published. It should be passed by the Islands' council in the next two weeks, and blocks will be put out to tender towards the end of the year. They are likely to be awarded during 1996, after which the drilling rigs will move into place.

Robert Esser, senior consultant with Cambridge Energy Research Associates in Boston, says many oil companies are watching with interest. 'We feel it has very good geological prospects, although we won't know what is there until the rocks have been drilled,' he said.

Despite better relations between Buenos Aires and London, the Argentinians are taking a strong public line on reserves they regard as their own. The British government has said it will consult on any developments in the Falkands with external implications, and has been discussing ways in which Argentinian companies could be involved in the oilfields.

Talks last month broke down, apparently because the Argentine government refused to let its companies pay royalties that could end up in Britain - royalties would go to Port Stanley but these could be used, for example, to pay for the cost of keeping British forces there, or even as retrospective payment for the 1982 war.

There are signs, however, that the Argentinians are keen to get involved. Industry insiders believe a Bermuda-registered company applying for a copy of the seismic survey is a front for Yacimientos Petroliferos Fiscales, the Argentine oil company.

Mr Esser says political uncertainty is unlikely to frighten oil companies off. 'The political element is not that dramatic compared to the Middle East and some other areas, and anyway oil companies are used to political uncertainty,' he said. 'Oil has a habit of being discovered in areas with difficult politics and a lousy climate.'

In public, the oil majors are cautious about the prospects. Peter Prynn, at Environmental Resources Management, which has just produced a report on oil strategy for the Port Stanley government, says this could be because none of them want to excite interest among the rest.

But it could also be because prospects are still so uncertain. 'It's all quite a long way off,' he said. 'There are no positive indications of oil - just good seismic surveys.' It is possible that there will be no oil or, almost as disappointing, only gas. 'Argentina is awash with gas,' he said.