There has been lots of speculation of late that Argentina might fancy having a pop at the Falkland Islands again.
I suppose that if the current UK government ploughs ahead with the massive cuts in public spending that have occupied many a headline of late, then perhaps they might be slightly tempted.
For now at least, the Falklands are much better defended than they were prior to the Falklands War of 1982.
But, if our Tory PM David Cameron and coalition LibDem sidekick Nick Clegg have their way, Old Blighty’s ability to rise to a scrap in the South Atlantic could be dangerously reduced.
However, for now, the Royal Navy still has some pretty sophisticated warships at its disposal and the RAF has the Typhoon, plus it still has the superb Harrier jump jet, whereas one understands the Argentine military machine has barely advanced.
So, on balance, it seems to me that Argentina would be plain stupid to try anything on in that regard. A bloodied nose would result.
But there is another way for the Argentines and their allies to get at the UK and grab control of at least a portion of Falklands resources by using the London Stock Market. It’s simple, sneaky and could happen without many of us realising it … at least initially.
All they have to do is mount hostile bids for UK companies holding oil and gas concessions around the South Atlantic archipelago.
You think I’m nuts? Well, read on.
As anyone who is currently following the Falklands drilling campaign knows, the game is controlled by three minnows … Desire Petroleum (DES), Falklands Oil & Gas (FOGL) and Rockhopper (RKH).
Thus far, RKH is ahead of the field, with its Sea Lion discovery apparently shaping up to be a major oil find; moreover it is already regarded as commercial by the company.
DES has a gas discovery but has yet to come up with something that will send its share price into orbit; while FOGL (in partnership with BHP of Australia) has notched up one duster so far.
RKH’s share price has risen dramatically in recent weeks and the prediction is that it will easily pass the £10 a share mark soon; doubling and even trebling that over a couple or three years, according to some.
There is speculation, too, that the firm will graduate from the AIM (Alternative Investment Market) to the FTSE 250 board soon and that personal fortunes will be made.
However, also in the conversation is the fact that these are small companies without the resources – financial or people – needed to develop a Sea Lion and get the oil to market.
This is a situation where, typically, an oilfield minnow would farm-down … sell off a portion of the prize to another company keen to build its reserves base and which has the experience and wherewithal to finance expensive new developments.
RKH owns 100% of Sea Lion and holds the entire exploration risk itself. Will it shoulder the whole development risk too? I doubt it. Better to invite in a much bigger partner experienced in such matters and dilute.
But then what happens if someone decides to mount a hostile bid for RKH and take control of Sea Lion and everything else in the firm’s portfolio? And if that bidder was Argentine – directly or through a cipher? Then what?
Now, I admit that I have not checked out who owns what with regard to DES, FOGL or RKH, but institutional shareholders are prominent in each and they basically call the shots. They are greedy and will sell readily if they see a fast buck.
In the same way that they appear content to sell Dana Petroleum down the river to the Koreans, they would not think twice about doing a deal if the offer was attractive, with just about anyone interested in taking out the three minnows who, for the time being, drive the Falklands exploration programme. They are pirates … out for what they can get.
Would the UK Government be able to stop a takeover by Argentine-controlled (directly or indirectly) interests? Would it even be interested? I’m not sure.
Of course, had the oil majors not made such a lousy job of the first Falklands exploration campaign of more than a decade ago, and bottled out so fast, the situation today might be completely different; perhaps even with oil and gas production.
There seems to be the cosy assumption afoot that the risk-averse heavy brigade will simply muscle in and take over the game on the cheap (FOGL is different as it already has mighty BHP as a partner).
Of course, the initiators get to stroll away, rich beyond their wildest dreams. I’m especially thinking of RKH in this regard, given that company’s success to date.
However, with various national oil companies stalking the world for assets and especially state-owned Chinese big names, the majors could very easily find themselves outbid in the Falklands anyway.
As it is, NOCs (national oil companies) are muscling in on the North Sea and the UK Government seems content to let that happen, even though the idea of state control is anathema to the Tories, especially because state control is supposed to be inefficient. Oh yes?
It is time for you lot down in Westminster to wake up and find a way of ensuring the Falklands resource does not fall into the wrong hands.
Should the Argentines try the approach mapped out here, don’t say you weren’t warned, especially with regard to the Falklands.
While on the subject of state-controlled companies buying their way into Britain, I’ve been thinking about that quite a lot recently, especially with regard to energy and transport businesses that grew out of privatisations of the Thatcher and Blair eras being taken over by the likes of Electricite de France. Only 15% of that huge company was floated on the stock market, therefore EDF is state-owned as far as I’m concerned.
When the UK energy minister, Charles Hendry, attended Offshore Northern Seas in Stavanger a few weeks ago, I challenged him on why it is that British state-owned doesn’t work, yet foreign state-owned ownership is acceptable.
He didn’t have an answer.