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UK's Brown says talks will end Falklands oil row

* Britain: UK firms within rights to drill around Falklands

* Brown: islands protected, “sensible” talks will prevail

LONDON, Feb 18 (Reuters) - Britain has taken steps to protect the Falkland Islands but expects to resolve a dispute with Argentina over drilling for oil in the South Atlantic through talks, Prime Minister Gordon Brown said on Thursday.

Nearly 30 years after the two countries fought a war over control of the British-ruled islands, Argentina is angry that British firms are searching for oil and gas in the seas around them.

Brown said international law allows British firms to operate freely in the area. Argentina has said their operations violate its sovereignty, and announced this week that boats sailing from its ports to the islands would need a permit.

“It is perfectly within our rights to be able to do this, I think the Argentinians actually understand that,” Brown told local radio. “Sensible discussions will prevail on this.”

Asked about a newspaper report that defence chiefs in London had sent extra warships to the region, Brown added: “We have made all the preparations that are necessary to make sure that the Falkland Islanders are properly protected.”

In 1982, Britain sent a naval force and thousands of troops to reclaim the islands after Argentine forces occupied them. About 650 Argentine and 255 British troops were killed in the 10-week conflict.

Argentina said earlier this month that it strongly opposed energy exploration on its continental shelf. “What they’re doing is illegitimate ... it’s a violation of our sovereignty. We will do everything necessary to defend and preserve our rights,” Foreign Minister Jorge Taiana said.

The row flared over the right to drill in the waters around the islands, which geologists believe contain substantial energy reserves.

Desire Petroleum DES.L, the British oil explorer due to begin drilling there soon, has said the dispute will not affect its plans. Its shares have fallen 13 percent in the last month.

The share prices of three other companies exploring in the region have also fallen in the last month, Falkland Oil & Gas FOGL.L by 10 percent, Borders & Southern BSTH.L by 6.3 percent and Rockhopper Exploration RKH.L by 21.8 percent.

Britain has a permanent military presence on the islands, which are called Las Malvinas in Argentina. There have been sporadic diplomatic spats over issues such as fishing and flights from the islands to mainland South America.

The British defence ministry denied reports that it was sending more ships to the Falklands. It already has 1,076 troops and four ships in the region.

“The government is fully committed to the South Atlantic Overseas Territories, which include the Falkland Islands,” it said. “A deterrence force is maintained on the islands.” (Editing by Tim Pearce)