A few dots near the bottom corner of the world map in the southern Atlantic, the Falkland Islands were once at the forefront of a new era for the oil industry as companies scoured the planet for resources. Yet a decade after the discovery of as much as 1.7 billion barrels of crude in surrounding waters, the British overseas territory known for sheep rearing and tension with Argentina looks as remote as ever. Rather than the next frontier, the project to extract energy risks being added to a list of what companies call “stranded assets” that could cost them huge sums to mothball.
As the coronavirus ravages economies and cripples demand, European oil majors have made some uncomfortable admissions in recent months: oil and gas worth billions of dollars might never be pumped out of the ground. With the crisis also hastening a global shift to cleaner energy, fossil fuels will likely be cheaper than expected in the coming decades, while emitting the carbon they contain will get more expensive. These two simple assumptions mean that tapping some fields no longer makes economic sense. BP Plc said on Aug. 4 that it would no longer do any exploration in new countries.
The Sea Lion project in the Falklands promised to be a world-class resource when Rockhopper Exploration Plc found the field in 2010. Hundreds of millions of dollars later and after enduring a flare up between Argentina and Britain over the legality of the project, the first phase still hasn’t brought any oil to market. Premier Oil Plc, Rockhopper’s partner, suspended work on Sea Lion earlier this year, and on July 15 wrote off $200 million of investment because later phases looked unlikely to happen.