BUENOS AIRES, Feb. 25 (UPI) -- Argentina is going ahead with deep-sea exploration for hydrocarbons close to the Falklands Islands territorial waters in the South Atlantic despite risks of heightened tensions with Britain and the U.K. overseas territory.
The drilling operation will be led by Repsol-YPF, Spain's largest oil company with strong partnership links in Argentina, with a $100 million investment and participation of Brazil's Petrobras and Pan-American Energy.
Argentina has been pushing for increased oil production as it has seen its output dwindle over the years. Argentina began producing oil in 1907 but expects to reverse the decline in its energy output with recent natural gas discoveries.
In addition to Argentina, the exploration project has drawn attention from China through its part ownership of Pan American Energy.
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Repsol-YPF said it would start the exploration off the coast of Tierra del Fuego in the Malvinas basin, which skirts Argentina's maritime border with the Falkland Islands.
Shortly before the announcement of drilling Argentine media reported claims by a former Argentine member of Congress, Mario Cafiero, that the vessels involved in the operation were flying British flags. Official announcements later said no U.K.-flag carriers would be involved but didn't make clear if the contracted vessels had been switched.
Oil industry sources quoted in the media also said no date was set for the start of the exploration but things were moving ahead as planned, MercoPress reported.
The drilling will be in water depths of more than 1,650 feet with wells drilled to depths of 6,600 feet.
Industry sources said Repsol-YPF will be operating the project with financial backing from its partners Brazil's Petrobras and Argentina's Pan American Energy, which is backed by China National Offshore Oil Corporation. YPF and Pan American each have a 33.5 percent share in the consortium that has rights to the block. Petrobras has the remaining stake.
YPF is exploring on its own and with Chile's ENAP Sipetrol Argentina and Argentina's state-owned Enarsa other areas off shore and has said it could explore off the coast of Buenos Aires province further to the north, MercoPress reported.
Enarsa holds rights to most of Argentina's offshore acreage, much of which is unexplored.
Planning Minister Julio De Vido, Argentina's chief energy strategist, said in January Enarsa is preparing an offshore licensing round that will likely take place later in 2011.
Argentina needs new discoveries to turn around a decline in oil and natural gas production and reserves as its onshore fields mature. The decline has already led to Argentina importing gas and diesel to meet shortfalls. Officials said they expected the imports to continue rising.
