Through the Wire

Argentina Will Sue Over Falklands Oil Exploration

March 19, 2012
| Energy
| Europe, The Americas
By Juliana Castilla

BUENOS AIRES, March 15 (Reuters) - Argentina will take legal action against any companies involved in oil exploration off the disputed Falkland Islands as part of a drive to pressure Britain into sovereignty talks, the foreign minister said on Thursday.

Three decades after it repelled an Argentine invasion of the Falklands, Britain has vowed to defend the archipelago, saying it will negotiate sovereignty or oil rights only in the unlikely event that the 3,000 islanders want that.

The conflict has heated up in recent months as the war's 30-year anniversary nears and findings by British exploration firms raise hopes of a potential tax windfall and boon to the islands' economy.

Argentina says the exploration and drilling activities are illegal since the area is contested. It says Britain is violating Argentine law and U.N. resolutions that call for talks and prohibit unilateral action as long as the dispute persists.

The South American country, run by center-left President Cristina Fernandez, will bring civil and criminal charges to sanction the gamut of companies involved.

"With these actions we assume the responsibility of defending Argentina's natural resources," Foreign Minister Hector Timerman told a news conference. "The South Atlantic's oil and gas are property of the Argentine people."

Britain reacted by saying it supported the rights of Falkland islanders to exploit their oil reserves. This was an "integral part of the right of self-determination", a British Foreign Office spokesman said.

It was not immediately clear what kind of judicial action Argentina could take. The government said it planned to seek international cooperation to gather information or enforce court orders issued by Argentine authorities.

Several companies have drilled in waters off the islands, which are called Las Malvinas in Spanish. British explorer Rockhopper has been seeking a partner to invest in the $2 billion Sea Lion project.

Borders & Southern and Falkland Oil & Gas are set to drill wells south of the islands this year.

An industry source in London said legal action against companies involved in Falklands oil exploration "will have no impact on Rockhopper's operations as they look to develop the Sea Lion project."

Borders & Southern declined to comment.



In addition to the exploration companies, Timerman said Argentina will go after the firms that run and provide services to the two drilling platforms in the area.

The Ocean Guardian platform is owned by Diamond Offshore Drilling Inc while the Leiv Eiriksson rig is owned by DryShips Inc and its majority-owned Ocean Rig unit.

Companies providing logistical, financial and legal support to the search for Falklands oil will also face administrative and judicial action, he added.

"Argentina understands that without the participation of many other actors, these illegitimate activities cannot be carried out," Timerman said.

The government will notify international investors like UBS , Fidelity and Credit Suisse - which hold shares in the exploration firms - of the actions it plans to take.

And it will urge U.S. and British market regulators to force the oil companies to disclose the risks involved in operating in an area subject to a messy sovereignty dispute.

The exploration licenses are awarded to firms by the islands' governor in consultation with the British Foreign Office.

In theory, any company could apply but the Falklands government would be unlikely to grant a license to an applicant in which Argentine interests hold more than 49 percent, according to a leaked cable from the U.S. embassy in London dated February 2010.

Falkland residents, known as "Kelpers," show no signs of wanting to break with Britain. (Additional reporting by Adveith Nair and Adrian Croft in London; Writing by Hugh Bronstein and Hilary Burke; Editing by Dale Hudson, Bob Burgdorfer, Phil Berlowitz)

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