Argentina threatens Premier Oil over Falklands deal
Argentina has threatened Premier Oil with legal action after the oil explorer agreed to invest $1bn (£650m) to help develop an oilfield offshore the Falkland Islands with oil group Rockhopper.
2:53PM BST 17 Jul 2012
The Foreign Ministry said it had taken legal action against Rockhopper’s “illegal” oil exploration activities on the “Argentine continental shelf”.
“Likewise, the Argentine government informed Premier Oil that the government … will initiate administrative, civil and penal action against it with regard to these activities,” the Foreign Ministry in a statement.
Argentina claims sovereignty over the islands. A claim it has pressed strongly since the discovery of oil in the Falklands in 2010, with verbal attacks on Britain and threats of legal action on oil companies drilling offshore the islands.
Last week, Premier said the threat of Argentine action was a “risk worth taking”. It hopes to see oil flowing from Sea Lion field by 2017. It has received a letter in the past asserting Argentina’s claim to the area’s oil.
Simon Lockett, Premier’s chief executive, said the company had “thought long and hard” before signing the Rockhopper deal and had sought advice on the situation, including from the UK government, before deciding it was “a good project to invest in”.
“Our conclusion was that this is a risk worth taking,” he said: “It would be foolhardy of us to dismiss the risk as nothing.”
The British government has made clear it will stand behind oil exploration in the area, while many doubt Argentina could succeed in any legal claims.
The Sea Lion field alone could deliver more than $9bn of tax and royalties to the Falklands, Edison Investment Research estimates.
Earlier this year, Argentina vowed to press criminal and civil charges on British oil companies exploring off the Falkland Islands.
Rockhopper received a letter, as did Falkland Oil & Gas, Borders & Southern, Desire Petroleum and Argos Resources on April 17, telling them “of their illicit actions and their consequences”.
Shares in Premier rose 3.7pc on Tuesday. Rockhopper shares fell 8pc.