Falklands risks diplomatic row with Britain over plans to drill huge oil field

The Falkland Islands is poised to approve a vast oil field in its waters in a diplomatic challenge to the UK and the Energy Secretary Ed Miliband’s anti-fossil fuel policies.

Rockhopper Exploration, the company which is seeking to commence drilling at the oil field, said this week its “view remained unchanged” on the Sea Lion basin, which holds at least 800m barrels of oil, making it larger than any project in the North Sea.

It sets the stage for a clash between the British Overseas Territory and the UK after Mr Miliband placed a block on all new oil and gas licences in July, just days after taking office.

Britain is unable to prevent the Falklands from exploiting oil reserves because it is outside of the jurisdiction of UK ministers. The UK is responsible for foreign affairs and defence in the Falklands but the British territory governs itself.

However, just last week David Lammy, the Foreign Secretary, whose department oversees the Falklands, said: “Action on the climate and nature crisis will be central to all that the Foreign Office does.”

The Falkland Islands has already rejected the UK Government’s requests to ratify the Paris Agreement on climate change, where countries commit to cutting their fossil fuel emissions to keep global temperature rises below 1.5C.

The EU and more than 190 other states have signed with Iran, Libya and Yemen among the few countries which have refused to take part.

Asked how Mr Lammy viewed the Falklands development, a Foreign Office spokesman said it would offer no financial support for such a scheme.

“As the Foreign Secretary set out in his speech on the climate crisis last week, we are resetting the UK’s approach to climate and nature by rapidly delivering new more efficient ways to reduce emissions,” he said.

“Since 2001, the UK has ceased financial support for the fossil fuel energy sector, including in its overseas territories.

“The natural resources of all UK Overseas Territories belong to the individual territories. Exploration of natural resources on the Falkland Islands is a matter for the Falkland Islands government and the private companies concerned.”

A public consultation on the Sea Lion oil field held this summer is thought to have garnered widespread support from the islanders and a final decision now rests with the Falklands government.

It told The Telegraph it supported the scheme, despite the contradictions with UK policy.

Asked how it reconciled its plans with the Energy Secretary’s stance on new oil and gas projects, the Falkland Islands government stressed its independence from the UK, adding that no direct conversations had been held with Mr Miliband’s department since early July.

A spokesman said: “We completely appreciate the UK’s stance on climate change and understand their position on prohibiting any new hydrocarbon licensing within the UKCS [UK continental shelf], while existing licences are honoured.

“The matter of development of the natural resources of the Falkland Islands is a devolved matter and is for the people of the Falkland Islands to decide.

“Given the UK’s robust and continued support to uphold the Falkland Islanders right to determine their own future we would expect this to extend to our freedom to choose whether or not to develop a hydrocarbon industry, subject to all of the appropriate checks and balances.”

The Department for Energy Security & Net Zero declined to comment.

If developed, the Sea Lion field, which lies 150 miles north of the South Atlantic archipelago, is predicted to generate £4bn for the 3,700 Falklanders over the next 35 years, equivalent to around £1m per islander.

The eventual amount could be much higher, with Rockhopper Exploration saying the basin could eventually yield 1.2bn barrels, with the discovery of another field nearby.

The Sea Lion field is likely to be highly profitable because it lies in waters that are relatively easy to exploit, being only around 500 metres deep. The field itself lies under another 2,000 metres of rock, also considered easy to reach using modern drilling technology.

It means the oil could be extracted for as little as $25-$30 a barrel – significantly cheaper than most North Sea oil fields, according to Rockhopper.

The field will also last much longer than almost any of those in UK waters, raising the possibility that the UK may one day be importing Falklands oil to power vehicles and for raw materials.