Managing Socio-economic Risk in Frontier Areas: A Case Study of Oil Development in the Falkland Islands

Abstract

Abstract Oil and gas activities raise important socio-economic questions for host governments, local communities and project proponents alike. If not identified and managed in a timely and effective manner, socio-economic issues - such as labour market effects, population influx, revenue management, social investment and socio-cultural change - can result in significant non-technical risk to projects including local opposition, permitting and project delays, inadequate delivery of benefits and reduced scope to prevent and/or mitigate negative impacts. These issues are particularly important where oil and gas projects take place in remote and environmentally and socially sensitive areas. Addressing socio-economic impacts early on can provide companies with timely identification of socio-economic, cultural and environmental issues at strategic and project level, as part of corporate planning, due diligence and risk management. Independent socio-economic impact studies can help resource companies (and host governments) plan projects more effectively, especially in relation to socio-economic impact management, social investment and overall stakeholder engagement. This paper explores the rationale, process and outcomes of an Independent SocioEconomic Impact Study of a proposed offshore oil development in the Falkland Islands. Arguing that the management of socio-economic issues is essential to any project’s approach to non-technical risk (NTR) management, the paper discusses the value of socio-economic impact studies as a means to manage socio-economic impacts. It also discusses key lessons of the Falkland Island study and its relevance to other projects around the world.