Oil explorers hit as tensions with Argentina rise

INVESTORS lost faith in oil firms planning to drill near the Falkland Islands after Argentina threatened to disrupt their activities in a revival of tensions with the UK after the Falklands War.

Shares in firms including Falklands Oil & Gas, Rockhopper and Borders & Southern Petroleum slipped by 3.5 per cent, 0.4 per cent and 3.6 per cent respectively after the Argentinian government ordered all ships heading to the Falklands through waters claimed by Argentina to seek permits first.

Buenos Aires is also demanding permission for ships headed to the uninhabited South Georgia and South Sandwich Islands, over which the South American country also claims sovereignty. The move is thought to be aimed at cracking down on shipping that might be involved in British oil exploration efforts. It could also hit the growing cruise ship industry in the Patagonian port town of Ushuaia.

It is likely to worsen relations between the two countries that have remained fragile since the Falklands War in 1982, which claimed almost 1,000 lives.

Geologists think the area around the Falklands could hold rich energy reserves, although drilling in the North Falkland Basin in 1998 did not lead to investment in exploitation.