STANLEY, Falkland Islands, Sept. 19 (UPI) -- Oil will start flowing from the Falkland Islands' offshore fields in 2016, one of the British prospecting companies active in the United Kingdom-ruled territory said.
The British-backed quest for oil in the islands' waters has angered Argentina, which is pursuing its claim of sovereignty over the territories at the United Nations and regional forums in Latin America.
A 74-day conflict on the islands in 1982 caused about 1,000 deaths before British forces repulsed an Argentine invasion force sent by the country's military rulers at that time. Although Argentina shook off its military rule after the defeat it maintained its sovereignty claim on the Falklands, which is rejected by Britain.
Rockhopper Exploration, the most successful of companies looking for oil in the deep-water hydrocarbon reserves in the Falklands region, said it expects to begin pumping oil in 2016.
The company's announcement was met with cautious optimism, partly because of anticipated Argentine reaction. Argentina has retaliated against oil activities in the islands' northern basin by blacklisting ships that dock in the Falklands, blocking exports to and from the Falklands and introducing sanctions aimed at restricting the islands' trade.
Rockhopper said it based its announcement on a 2010 discovery in a deep-water sector called the Sea Lion. Output is likely to reach around 120,000 barrels of oil per day by 2018.
The company said it might need additional investment to bring its plan to fruition. The development costs of the Sea Lion offshore production facility are likely to reach $2 billion. The Falklands government of the British Overseas Territory is drawing up regulations to prepare for the oil production phase to start.
The oil companies' exploration activities have brought economic benefits to Falklands. The government hopes to cash in on the industry's growth through taxation and growth of the services sector. Sheep farming is the mainstay of the islands' economy.
Argentine President Cristina Fernandez de Kirchner is poised to renew sovereignty claims when she addresses the U.N. General Assembly this week. Argentina wants talks with Britain on Falkland Islands' future status. Britain rejects the demand, citing the Falklanders' self-rule.
Support for Argentina has come from most Latin American countries, including Mercosur trade bloc and UNASUR regional security pact.
Argentina is also ratcheting up pressure on Latin neighbors to take its line on the Falklands. A Chilean town mayor who plans to visit the Falklands became the latest cause of an Argentine flap, when Argentina's Tierra del Fuego southern province officials threatened to boycott Chile's independence anniversary celebrations in anger over a comment by Cabo de Hornos Mayor Hugo Henriquez Matus.
Henriquez referred to the islands as Falklands, not the Malvinas, as Argentina calls the territory and wants its neighbors to do the same.
"We are waiting for an official apology from the mayor of Cabo de Hornos. Although Chilean national authorities have done so, specifically the mayor has yet to comply," Guillermo Gomez, a spokesman for Argentina's Tierra del Fuego provincial government said.
Cabo de Hornos, also known as Cape Horn, is a southern Chilean community close to Puerto Williams in Argentina.
Tierra del Fuego officials and other local authorities are regularly invited each year to participate in Chilean independence celebrations in Puerto Williams.