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Argentina to prosecute UK Falklands firms

Argentina will launch criminal proceedings against British companies hunting for oil and gas in the Falklands next year, as the South American state looks to pressure the UK to the negotiating table.

Sources at the Argentinean embassy in London said criminal action in Buenos Aires was the "next step" to prevent oil majors from helping the likes of minnows Argos Resources and Desire Petroleum from securing the money they need to develop any discoveries.

Politicians in Buenos Aires have been frustrated that they cannot get the British Government to relent on a policy that allows UK firms to explore for energy in what they regard as a disputed territory, arguing these are "illegal activities".

They claim Foreign Secretary William Hague has refused to meet over drilling in the Falklands and hope that strangling the chances of commercialising any finds will ultimately lead to a compromise over the islands' future.

So far, FTSE 250 group Premier Oil is the biggest British company to agree to helping out the five main explorers around the islands, having signed an agreement with Rockhopper Petroleum. However, Argentina's energy prospects are so vast that the biggest companies are wary of risking a 20-year ban on operating in the country, which is what has been slapped on those five small groups which have dared to explore the Falklands.

In July, US giant Chevron signed a $1.24bn (£927m) deal with state-backed YPF to develop shale oil and natural gas in southern Argentina, while BP wrote a letter last year guaranteeing that they would not back any expeditions in what Buenos Aires calls the "Malvinas".

Argentina's treasury attorney general's office has vowed to "draft a criminal investigation" against the five companies, which also include Falkland Oil & Gas and Borders & Southern Petroleum. A senior embassy source said this action would be lodged with the courts next year.

The source conceded that the companies are likely to ignore the proceedings, but argued the move would heap pressure on the world's biggest oil and gas firms to ignore any black gold found in the Falklands. As a result, any discoveries would remain buried under the sea bed, as the explorers would not have the balance sheets to fund full-scale production.