Argentina declared British oil exploration off the Falklands”illegal” on Monday and immediately set about suing five companies for pursuing activities around the contested islands.
Three decades after the Falkands war, the promise of oil reserves is inflaming tensions between Britain and Argentina while also boosting the economic hopes of the islanders — who number only a few thousand.
Argentine President Cristina Fernandez de Kirchner declared the British activity “illegal and clandestine” and her foreign ministry followed up by saying this action had opened the way for criminal proceedings to begin.
“The declaration of clandestineness clears the way for the immediate launch of civil and criminal action against these businesses,” said a foreign ministry statement that spoke of seeking fines and penalties.
It said the Argentine government would soon be in communication with Britain’s Treasury, its Financial Services Authority, the International Organization of Securities Commissions (IOSCO) and the New York Stock Exchange.
The Buenos Aires government first announced in March that it intended to take legal action against the British oil concerns but it has never made clear how it intends to go about it or where it intends to file suit.
The companies — Desire Petroleum, Falkland Oil and Gas, Rockhopper Exploration, Borders and Southern Petroleum and Argos Resources — “are not authorized by the Argentine government under law,” read a resolution published Monday in Argentina’s Official Bulletin by Energy Secretary Daniel Cameron.
The island’s oil reserves, which remain untapped until now but which analysts predict could be worth tens of billions of dollars, have been a major source of tension between the countries since their discovery in 1998.
At the time a barrel of crude sold for less than $10 — today it would fetch $125 — and firms led by Anglo-Dutch energy giant Shell abandoned their exploration on the grounds it was not profitable enough.
The rocketing price of oil since then has enticed the five companies back to the islands, hoping to cash in on what might be one of the world’s last new sources of fossil fuels.
To Argentina’s dismay, drilling resumed in 2010 with Rockhopper and Desire Petroleum taking the lead.
Three small companies followed suit, but until now only Rockhopper — named after one of the Falklands’ resident penguin breeds — has confirmed significant reserves, in the Sea Lion field to the north of the islands.
Rockhopper plans to start developing the field this year, and expects to pump the first of its estimated 450 million barrels in 2016, according to analysts Edison Investment Research (EIR).
Meanwhile companies operating in the Southern Basin, where drilling has begun this year for the first time, hope to confirm reserves of eight billion barrels in the deepwater area at the islands’ tip.
This buried treasure dwarfs the proven oil reserves of Britain.
With just three billion barrels remaining in oil fields in the North Sea, Britain has a strong financial motivation to cling on to the Falklands, a tiny territory 8,000 miles (12,900 kilometres) from its own shores.
Britain’s Sunday Telegraph reported in April that Argentina has threatened to sue several international banks for advising firms hunting for oil off the Falkland Islands and writing reports on them.
Britain and Argentina’s renewed war of words over the Falklands intensified in the weeks leading up to last month’s 30th anniversary of their brief but bloody conflict over the archipelago in the South Atlantic.
Britain has ruled the Falkland islands, off the coast of Argentina — called the Malvinas here — since 1833.
The 1982 Falklands War, which began with an invasion of the islands by Argentine forces, ended in their defeat and the deaths of 649 Argentine and 255 British servicemen.
