Shares in Rockhopper Exploration fell as much as 8.7 per cent to 26p this morning, after the United Nations expanded Argentina's waters to include the Falkland Islands.
The UN sided with Argentina in its dispute with the UK, consequently expanding its maritime territory in the South Atlantic Ocean by 35 per cent to include the Falkland islands and beyond.
"Our understanding has always been that the UN would not make any determination on applications for continental shelf extension in areas where there are competing claims," Mike Summers, chairman of the Legislative Assembly of the Falkland Islands, which governs the islands' internal affairs, said.
But there are concerns that if the decision, which is yet to be finalised, goes ahead, this could slow down Rockhopper's plans for a widely anticipated project there.
Rockhopper wants to develop its Sea Lion site in the North Falkland Basin alongside FTSE 250-listed Premier Oil, with the latter yet to make a final investment decision.
It comes from the from the UN Commission on the limits of the continental shelf.
The Commission on the Limits of the Continental Shelf is an advisory body created under the 1982 United Nations Convention on the Law of the Sea, however it is not a United Nations' Commission.
Britain and Argentina fought a short war in 1982, after the then Argentine military dictatorship briefly seized the islands. However, tensions have escalated again in recent years with the discovery of oil deposits.