Falkland Islands: Premier Oil plan leads UK and Argentina to new dispute Government backing of Premier Oil's investment in oil drilling in the South Atlantic may lead to further disputes with Argentina over the Falkland Islands. Photograph: George Steinmetz/Corbis Britain put itself on a collision course with Argentina over the disputed sovereignty of the Falkland Islands when it gave explicit support to a £600m plan to develop oil reserves in the south Atlantic on Wednesday. Barely three weeks since the two countries clashed over the issue at a G20 summit, and 30 years on from the military conflict on the islands, the Foreign Office has made it clear that hydrocarbons exploration in the area is a legitimate business. The government's backing for Premier Oil's move to buy a 60% stake in a licence to explore and develop oil prospects off the Falklands will infuriate Argentina, which has threatened criminal and civil charges against companies operating in the disputed area. But a Foreign office spokesman said: "We have been unequivocal in our support for the people of the Falkland Islands as they seek to expand their economy. This [drilling] is a core principle of self-determination, and one which we are determined to uphold. Premier, a FTSE 250 company, has bought the holding from Rockhopper Exploration, which has been seeking a partner to develop the Sea Lion field, believed to hold over 300m barrels of oil. "Rockhopper has made excellent progress in commercialising the Sea Lion project, which offers attractive returns and fits well with Premier's proven operating and development skills," said Simon Lockett, Premier's chief executive. This transaction extends our strong growth profile beyond 2015 and offers both exploration and development upside for our shareholders. We look forward to working closely with Rockhopper and the Falkland Islands government on this very exciting project," he added. Industry sources confirmed that the company, which also holds stakes in the UK North Sea and Africa, had taken advice from the British government before closing the deal with Rockhopper. Obviously there is an element of political risk here, but there is political risk everywhere, including the North Sea, where the tax regime keeps changing. The [UK] government clearly backs the Falklands government. The Argentinians are sabre-rattling for internal political reasons," said the source. Stephen Luxton, director of mineral resources for the Falklands government, said: "We are delighted by the news that Premier Oil is joining forces with Rockhopper Exploration to develop the Sea Lion field. It opens the next chapter in the story of Falklands offshore activity, it brings another capable and well-funded partner into the region, and it confirms our belief that the Falklands offers an exciting range of opportunities for the oil industry. The City showed no concerns for Premier about the controversial deal, pushing up its shares by 2% to close at 366.3p. However, Rockhopper fell 9.3% to 248.5p. Argentina has previously written to Rockhopper and other UK companies searching for oil off the Falklands, saying it will press charges over "illegal" drilling. The Foreign Office spokesman said Argentina's legal threats had no basis in international law, saying their laws did not apply to the Falklands. "The fact that oil companies are able freely to raise capital on the markets suggests that international business take this view too," he added. The British government announced last month that it would be holding a referendum on the islands to try to bury the issue of sovereignty once and for all. But ministers in Buenos Aires have made increasingly aggressive statements about their claims to the Falklands, or the Malvinas, as they called in Argentina. Last month the country's president, Cristina Fernández de Kirchner, tried to personally hand over claims documents to David Cameron at a G20 summit in Mexico. The action was dismissed by British officials as a "stunt" because it took place in front of pre-assembled television cameras. The Falklands is one of an increasing number of politically or environmentally sensitive areas that are being earmarked for oil development as traditional hydrocarbon provinces dry up or become closed to foreign operators.