THE promise of offshore-oil riches has dangled over the Falkland Islands for years. Seismic data go back as far as the 1950s; exploratory wells were drilled in 1998. With just 2,563 residents, a multibillion-dollar oil industry would make the Falklands one of the richest communities on earth. The local Falkland Islands Government (FIG) has already crafted its own fiscal policy to collect a 9% royalty on petroleum that is eventually extracted and a 26% corporation tax on future licensees. The FIG is planning to channel revenues into a sovereign-wealth fund, modelled on Norway’s.

All this potential wealth sharpens antagonism between Britain and Argentina, which also claims sovereignty over the islands that it calls the Malvinas. Daniel Filmus, a one-time Argentine senator who recently became head of a new “Malvinas Secretariat”, has warned firms drilling off the islands’ coasts that they will be ineligible to exploit shale-oil and gas in Patagonia’s vast Vaca Muerte field. In November the Argentine congress passed a law to impose hefty fines and prison sentences of up to 15 years on anyone involved in exploring the Falklands’ continental shelf without its permission.

The supermajors with an eye on Argentina, such as Chevron and BP, are not expected to pursue work in the Falklands in the foreseeable future. That leaves the field clear for smaller, mainly UK-based companies to prospect under the waves.

Premier Oil is the closest to extracting oil, the waxy crude of the Sea Lion field, which is located in the North Falklands Basin (see map) and holds an estimated 400m barrels of recoverable oil. A decision on whether to develop the field is expected in early 2015. But shareholders are concerned about the estimated $3.8 billion it will take to get to “first oil”, scheduled for 2018 at the earliest. Their angst helps to explain the resignation of Simon Lockett, the company’s chief executive, in early February. To finance its operations, Premier is seeking to sell a 30% stake in its project to a potential partner. A three-way exploration agreement has been reached for nearly ten million largely unexplored acres east of the islands. Falkland Oil and Gas (FOGL), another British firm, partnered with the region’s first two non-British energy companies: Edison (out of Italy) and the American firm Noble Energy. Borders & Southern, which found gas condensate south of the islands in 2012, is also currently searching for a partner to put more holes into the shelf. But the combination of extreme wind, powerful waves and frigid temperatures makes this a particularly harsh environment. “In the Falkland Islands, we are a long way from everything,” says Richard Winkelman, Noble’s country manager. “We know it's going to be a unique challenge for us.” A lack of infrastructure, needed for the import of exploration equipment, is another impediment. The FIG would prefer to develop a deepwater port for this purpose, but wants the oil companies to pay for it—something the firms will balk at until it is clear how much oil they can get. In the meantime, a temporary dock facility—a 400-foot by 100-foot barge—is expected soon to connect to Stanley’s shorefront through a series of causeways.

On a visit to the Falklands this month, Hugo Swire, a British foreign-office minister, rebuffed suggestions that firms would be put off by Argentine threats. “No, we very much hope that people won't be scared off,” he said, before putting his finger on the real problem. “I think once we know there is oil and gas here, it is just a question of making it happen.” The islanders are confident that oil riches lie in their future. For now, though, that’s where they remain.