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Argentina sanctions oil companies for drilling in contested Falkland waters

Highlights

Chrysaor, Harbour, Navitas face bans

Argentina will seek asset embargoes as well

Argentina's government said July 7 it has banned three companies from operating within its borders for up to 20 years after they failed to get its permission before investing in oil drilling in contested waters around the Falkland Islands in the South Atlantic, a move that comes as companies explore other offshore regions in the country.

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The prohibition is on the UK-based companies Chrysaor Holdings and Harbour Energy, as well as Israel-based Navitas Petroleum, Daniel Filmus, Argentina's secretary of the Malvinas, Antarctica and South Atlantic, said in a press conference.

These companies have teamed with companies already exploring areas around the Falklands, known as the Malvinas in Argentina, without the authorization of Argentina, as required by national law, he said.

"Nobody can explore for hydrocarbons in the Argentinian continental platform without the authorization of the government," Filmus said.

The three companies have put capital into exploration ventures in the North Falklands Basin, or North Malvinas Basin, he said, adding that the sanctions could include asset embargoes.

Chrysaor, Harbour and Navitas have 20 working days to present a defense, Filmus added.

These are the latest oil companies to get sanctioned in Argentina for operating in waters around the Falklands without Argentina's authorization. Between 2011 and 2015, eight other companies were sanctioned, Filmus said.

Argentina claims that the companies are carrying out exploration in waters off the Falklands in violation of Argentine and international law, as well as a UN resolution barring such activities while the question of the sovereignty of the islands remains unresolved.

Argentina and Great Britain fought a brief war over the islands in 1982 and relations have remained tense on the sovereignty issue since, with neither side sitting down for talks. The situation worsened in 2010 when UK companies started drilling in the area around the islands.

Offshore exploration

The latest sanctions come after Argentina in 2019 launched its first offshore round in three decades, when 18 blocks were awarded to 13 companies, including ExxonMobil, Shell, France's Total and Equinor, as well as UK-based BP and Tullow, Italy's ENI and Japan's Mitsui. The winners committed to invest a combined $720 million in exploration.

It's still uncertain if any finds will be discovered off the coast of Argentina, where there has been little exploration and the only production for years has been in shallow waters in the Austral Basin to the south of the Falkland Islands off the coast of Tierra del Fuego.

The offshore blocks in Austral, operated by Total, are the source of about 20% of the country's 115 million cu m/d of natural gas and minor amounts of oil.

The first round, however, kicked up interest, with both Equinor and Shell subsequently increasing their offshore acreage, while also stepping up their onshore bets, in particular in Vaca Muerta, one of the world's largest shale plays, which has the potential to take total oil production to more than 1 million b/d by 2040, according to an estimate by Ecolatina, a consultancy in Buenos Aires.

Indeed, Argentina's Energy Secretary Dario Martinez said in the press conference that he doesn't expect the sanctions to sour the appetite of other companies to invest in Argentina, including in its largely virgin offshore region.

"We have received numerous companies from around the world, including British companies, which have decided that they are not going to invest in the Malvinas region without Argentina's authorization because they want to invest in Argentina," he said.