British oil explorer shrugs off Argentine threat

By Eric Watkins

LOS ANGELES, April 27 – Borders & Southern, the UK oil firm which currently holds five exploration licenses offshore the Falkland Islands, is apparently unmoved over recent legal threats issued by Argentina’s government.

Indeed, far from shrinking away, Borders & Southern has just raised more cash for further exploration – a sign that the firm, as well as its investors, has little concern about the bluster emanating from Buenos Aires.

“We are delighted to announce the success of this conditional fundraising,” said Howard Obee, Chief Executive of Borders & Southern, referring to the more than £46 million the UK-based firm raised in the placement of 55 million shares at 84 pence each.

“The proceeds of the placing will strengthen our already robust balance sheet and allow Borders & Southern to complete additional work including additional seismic and analysis to better understand the recent drilling results,” said Obee.

Investors were not thrown off by the company’s earlier report – seen as disappointing by some – of its discovery of gas instead of oil in the chilly waters off the Falklands, also known as Las Malvinas in Spanish.

GAS CONDENSATE

Borders & Southern said it discovered gas condensate, otherwise known as “wet” gas, in its Darwin well. Borders & Southern described the find as a large and simple structure that is likely to contain “significant” volumes of gas.

Neither Borders & Southern nor any of its investors mentioned a word about threats of legal action coming from Argentina. For that matter none of the other companies named by Argentina’s foreign ministry yesterday acknowledged the threats either.

Meanwhile, leaders in Argentina continued to defend their government’s decision to nationalize Yacimientos Petroliferos Fiscales, with Foreign Minister Héctor Timerman dismissing as “unacceptable” criticism by European Union Trade Commissioner Karel De Gucht.

“I find your criticism to our country’s trade policies unacceptable,” said Timerman in a letter to De Gucht. “Argentina complies with its international obligations,” he said.

“The decisions that [Argentina] makes on trade are transparent and consistent with the norms and commitments taken in the World Trade Organization,” Timerman said in his letter.

SENDING SHOCK-WAVES

“By taking this action, Argentina has sent shock-waves through the international business community,” De Gucht had said earlier, referring to the seizure of Repsol YPF by the government of President Cristina Fernandez de Kirchner.

“The consequences for its own economic development will be felt for a long time to come,” De Gucht told the European Parliament’s Committee on International Trade.

De Gucht also said that the action by Argentina is a reminder “of the importance of moving quickly to equip the European Union with all the means it needs to implement an effective investment policy.”

Timerman couldn’t resist using his letter to take a swipe at Catherine Ashton, the EU’s High Representative of the Union for Foreign Affairs and Security Policy, “who did not reply to any of the calls I made to her to discuss why the UK refused to comply with the UN resolutions on the Malvinas sovereignty issue.”

US VIEW

The UK and Spain are hardly the only nations that Argentina has a difficult relationship with these days, a point underlined by Roberta Jacobson, Assistant Secretary of State for Western Hemisphere Affairs.

Speaking to the House Foreign Affairs Committee, Subcommittee on the Western Hemisphere on April 25, Jacobson told Congressmen that the US finds its relationship with Argentina challenging.

“Frankly, there are areas of the relationship that are very challenging and which are not moving ahead,” she said, adding that, “some of those are Argentina’s relationship to the international financial community.”

“You know, we think that Argentina needs to get itself back positive relationship with the international financial community, both for their own economic future and for the system and those creditors in the United States and elsewhere,” she said.

FOUR LEGS GOOD

The entire Argentine government none the less appears to be assuming a single voice when it comes to Repsol YPF matter, all trying to justify the takeover as a result of the firm’s underinvestment in the country’s oil and gas industry.

Planning Minister Julio De Vido, Economy Minister Hernán Lorenzino, and Deputy Economy Minister Axel Kicillof, referring to an ad placed by Repsol in the nation’s newspapers, all denied the firm had ever invested $20 billion in the country.

“Between 1998 and 2011 YPF experienced a 54% drop in oil production and a 97% fall in gas production,” said Lorenzino, adding that “This clearly implies damage to the economy and translates into damage on the people.”

About the only thing not said by ministers in justification of the takeover was “four legs good, two legs bad.” But then this is Argentina and not Animal Farm, right?

© Glamma Productions 2012

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About Eric Watkins

Eric Watkins is a consultant specializing in oil diplomacy. A former journalist, Mr. Watkins's work has appeared in numerous leading publications including The Wall Street Journal, The Economist, The Financial Times, and specialist media such as Oil & Gas Journal, Middle East Economic Survey (MEES), and Lloyd's List.
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