Argentina's permits won't affect Falklands oil drill

LONDON (Reuters) - An oil drilling project in the Falkland Islands will go ahead as planned despite a move by Argentina aimed at restricting access in the area, analysts and an exploration company said on Wednesday.

Argentina, which claims sovereignty over the British-ruled islands, said on Tuesday that boats sailing from its ports to the Falklands would need a government permit, deepening a long-running row over exploration in the disputed archipelago.

Desire Petroleum (DES.L), the British oil explorer which is due to begin drilling in the islands shortly, said the move would not affect its drilling program.

"This whole situation has unfortunately been anticipated for months," a Desire spokesman said. "Desire's logistics are unaffected."

Arbuthnot analyst Dougie Youngson said the company should be able to work around the restrictions.

"Logistically it makes life a bit more complicated but it's manageable," Youngson said.

Argentina protested to Britain earlier this month over plans to begin offshore exploration drilling near the remote Falklands, which are called the Islas Malvinas in Spanish. The nations fought a short war over the islands in 1982.

"It's all saber rattling," Youngson said. "They want to exert a bit of muscle but I don't think it will come to anything."

John Dalby, chief executive of maritime security company MRM, which provides risk assessments to shipping companies, said drilling companies could bypass Argentina and pick up bunker fuel and other resources at ports in Brazil.

"If a company wants to establish a platform out there serious consideration should be given to chartering a relatively small tanker loaded with fuel oil and marine diesel and ship-to-ship transfers could then be conducted, weather permitting, en route," he said.

FRONTIER EXPLORATION

Britain's Tristan da Cunha islands, which are quite close to the Falklands, could also be used as a logistics hub, he said.

J. Peter Pham, an adviser on strategic matters to U.S. and foreign governments, said Argentina's move could create "momentary disruptions" for companies, but added they would divert their shipping needs elsewhere.

"Ultimately it may determine where these energy supplies will be shipped through and that will be in Argentina's long term disadvantage," he said.

The drill is likely to become a more significant issue should oil actually be discovered, analysts said.

Arbuthnot's Youngson said earlier this week in a note on Borders & Southern, which also has interests in the area but has not yet contracted a rig, that this was "frontier exploration" with a 20 percent or less chance of success.

Desire has contracted the 'Ocean Guardian' rig, which is due to arrive by the end of the week and would be the first to drill in the South Atlantic islands since 1998.

Desire's shares pared earlier losses of over 3 percent and were up 0.46 percent at 1642 GMT, while Borders & Southern (BSTH.L) was down 3.62 percent.

Two other explorers with Falklands drilling campaigns planned were also down - Falkland Oil & Gas (FOGL.L) fell 3.49 percent, while Rockhopper Exploration (RKH.L) slid 0.39 percent.

(Additional reporting by Sarah Young, Editing by Paul Hoskins and Sharon Lindores)