The oil and gas industry is well aware of Venezuela's President Hugo Chavez and his antics. Now, the Latin American dictator has become an advisor of sorts to Britain's Queen Elizabeth II.
"Queen of England, I'm talking to you," Chavez said in a recent radio broadcast. "The time for empires is over, haven't you noticed? Return the Malvinas to the Argentine people."
Las Malvinas, of course, is the name used throughout Latin America for the Falkland Islands—a name which actually derives from the French, who called the archipelago Les îles Malouines, after early settlers from the French port of Saint Malo.
So, returning the islands to Argentina might be more difficult than Chavez imagines, even if the queen had the power to meet the Venezuelan dictator's demands. But what's Chavez really up to here?
Argentina threatened
"The English are still threatening Argentina. Things have changed," said Chavez, still addressing the queen. "We are no longer in 1982. If conflict breaks out, be sure Argentina will not be alone like it was back then."
Oh, okay, so what does this mean? You don't have to be a political scientist to recognize Chavez's usual gambit: rallying popular opinion to consolidate his own self-proclaimed position as the defender of Latin America.
Are we to imagine that Chavez plans anything more than a campaign of words? Do we really expect to see the Venezuelan navy steaming southward to defend Argentina's alleged interest in the Falklands?
To be sure, the dispute with Buenos Aires over sovereignty is expected to make exploitation of any oil found more expensive than otherwise since supplies and equipment cannot be imported from Argentina, which recently imposed its own restrictions (OGJ Online, Feb. 17, 2010).
The spat also means any gas discoveries will need to be very large to be commercially viable as the island's population of around 2,500 is a limited market and the gas cannot be piped to the mainland.
Investors undaunted
"Only if a gas discovery was very large would it justify the construction of an LNG terminal from which the gas could be exported," one analyst said, noting: "LNG facilities cost billions of dollars to build."
Undaunted, British investors clearly are backing the effort to find oil and gas in the region. Desire Petroleum PLC saw its shares spike more than 10% after its Ocean Guardian rig arrived off the islands last week to start drilling.
Meanwhile, Argentina is going full tilt on the diplomatic front.
"Argentina has made significant diplomatic advances among the 33 foreign ministers of Latin America and the Caribbean that strengthen our country" in the dispute, said Argentina's Foreign Minister Jorge Taiana.
Taiana said he hoped the group would issue a statement condemning the British intent to drill around the islands. Meanwhile, the queen is doubtlessly giving as much consideration to Chavez's advice as she would that of a paper tiger.
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