Falkland Islands - Economy

Economy

The earliest economic activity on the islands, from 1770 onwards, was whaling and sealing. From the mid ninteenth century onwards, sheep farming played an important part in the island's economy. In more recent years fishing, oil exploration and tourism have played a leading part in the economy of the islands.

Today, apart from defence, the islands are self sufficient with annual exports of $125 million and imports of $90 million (2004 estimate). The Falkland Islands use the Falkland pound, which circulates interchangeably with the pound sterling and which is backed by the pound sterling on a one-for-one basis. Falkland coins are produced in the United Kingdom; coins are identical in size to the United Kingdom currency but with local designs on the reverse. The Falkland Islands also issue their own stamps. Both the coins and stamps are a source of revenue from overseas collectors.

Farmland accounts for 1,123,985 ha (4,339.73 sq mi), more than 90% of the Falklands land area. Since 1984, efforts to diversify the economy have made fishing the largest part of the economy and brought increasing income from tourism. Sheep farming was formerly the main source of income for the islands and still plays an important part with high quality wool exports going to the UK. According to the Falklands Government Statistics there are over 500,000 sheep on the islands with roughly 60% on East Falkland and 40% on West Falkland.

The government has operated a fishing zone policy since 1986 with the sale of fishing licences to foreign countries. These licences have recently raised only £12 to 15 million a year in revenue, as opposed to £20m to £25m annually during the 1990s. Locally registered fishing boats are also in operation. More than 75% of the annual catch of 200,000 tonnes (220,000 short tons) is squid.

Tourism has grown rapidly. The islands have become a regular port of call for the growing market of cruise ships with more than 36,000 visitors in 2004.

A 1995 agreement between the UK and Argentina had set the terms for exploitation of offshore resources including oil reserves as geological surveys had shown there might be up to 60 billion barrels (9.5 billion cubic metres) of oil under the seabed surrounding the islands. However, in 2007 Argentina unilaterally withdrew from the agreement; Falklands Oil and Gas Limited then signed an agreement with BHP Billiton to investigate the potential exploitation of oil reserves. Due to the difficult climatic conditions of the southern seas exploitation will be difficult, though economically viable; the continuing sovereignty dispute with Argentina is also hampering progress.

In February 2010 exploratory drilling for oil was begun by Desire Petroleum, but the results from the first test well were disappointing. Two months later, on 6 May 2010, Rockhopper Exploration announced that "it may have struck oil". Subsequent tests showed it to be a commercially viable find; an appraisal project was launched and on 14 September 2011 Rockhopper Exploration announced that plans were under way for oil production to commence in 2016, through the use of floating production storage and offloading (FPSO) technology.