MercoPress. South Atlantic News Agency

Argentina declares Falklands’ oil activities “illegal and clandestine” and anticipates criminal and civil actions

A state of the art oil rig is operating to the south of the Falklands while Rockhopper plans to develop the Sea Lion field

Argentina declared on Monday the oil exploration by UK-listed companies in Falkland Islands waters “illegal” and their activities “clandestine”. Argentina has long claimed the Falklands/Malvinas as part of its territory.

The companies' activities “proved to be illegal and clandestine, as they're taking place in a sovereign area of the Argentine nation and as such fall within its specified laws and rules”, said the official website from the Ministry of Foreign Affairs.

The government of President Cristina Fernandez announced in mid-March that it would seek civil and criminal legal action against the companies at the heart of the accusations.

Energy Secretary Daniel Cameron published five resolutions in Argentina's Official Bulletin declaring activities by the companies “illegal” and “clandestine” and underlining they “are not authorised by the Argentine government under law 17.319 on hydrocarbons”.

The five companies involved are Desire Petroleum PLC; Rockhopper Exploration PLC; Argos Resources Ltd.; Borders & Southern Petroleum PLC and Falkland Oil & Gas Ltd, don’t have “the permits and approvals to conduct offshore exploration in Argentine waters”.

“The declaration of clandestineness clears the way for the immediate launch of civil and criminal action against these businesses,” said the Foreign Ministry statement that spoke of seeking fines and penalties because of “customs and fiscal crimes”.

It added 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

Tensions between Argentina and the Falklands have risen since 2010, when UK-listed oil companies started drilling for an estimated 8.3 billion barrels of crude believed to be under the waters surrounding the Falklands.

Argentina has also threatened similar measures against the shareholders of the companies and their bankers and advisors. However it isn’t immediately clear what tangible impact if any the administrative and legal proceedings will have on the oil companies, as none are believed to have assets in Argentina.

The UK government has said there is no chance of negotiating the sovereignty of the Falklands with Argentina unless the Islanders ask for talks and has reaffirmed its support for the Falklands to develop their own hydrocarbons industry.

“It is our firm conviction that the Falkland Islands Government is entitled to develop both fishery and hydrocarbons industries within its own waters, without interference from Argentina. Falklands’ hydrocarbons exploration is a legitimate commercial venture.We unequivocally support the right of the Falkland Islanders to develop their natural resources for their own economic benefit. This right is an integral part of their right of self-determination, which is expressly contained in the International Covenant on Civil and Political Rights.  All hydrocarbons activities on the continental shelf of the Falkland Islands are regulated by legislation of the Falkland Islands Government, in strict accordance with the United Nations Convention of the Law of the Sea”, said a long statement on the issue from the Foreign Office in late April.

The Falklands’ 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 dollars, 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 Falklands, 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 Desire Petroleum and Rockhopper taking the lead. Three other companies followed suit, but until now only Rockhopper has confirmed significant reserves, in the Sea Lion field to the north of the Islands. Desire Petroleum declared the discovery of potential gas reserves and Borders & Southern, drilling in the Southern basin, gas condensate.

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).

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 12.900 kilometres from its own shores.