Argentina has set itself on another collision course with Britain by planning to use seized energy company YPF to search for oil around the Falkland Islands, according to reports.

State-controlled YPF, formerly owned by Spain's Repsol, is teaming up with Venezuelan oil giant PDVSA to explore the area.

"We discussed the need for oil and gas exploration in the territory and offshore areas, adjacent to the Falklands, but we have to analyze the costs and time," PDVSA president Rafael Ramirez Carreno told Argentine newspaper Pagina12.

The executive said he spoke with the president of YPF, Miguel Galuccio, in Buenos Aires last Wednesday.

Argentina's move threatens to further antagonise the UK government on the 30th anniversary of the war the two fought over the Falkland Islands.

Earlier this year the Argentine government sent a letter to 15 British and American banks threatening them with legal action for advising companies exploring for oil around the islands.

The British government tabled a White Paper in June officially pledging to defend the islands and declared there would be "no weakening" in the country's resolve.

Mr Carreno said the prospective investments are the result of joint-ventures in Venezuela between the two South American countries.

"We have a field in the [Venezuelan] Orinoco [Heavy-Oil] Belt, which produces 130,000 barrels a day," he said. "We will increase that production to 160,000 barrels and develop another field, which would produce another 200,000 barrels."

The Orinoco Belt is an area of 21,357 square miles (55,314 square kilometers) in the east of the country that has some 235,000m barrels in proven reserves.

However, Mr Carreno added that Venezuela is "proceeding with caution" after a warning by Repsol to companies that partner with YPF after the expropriation of its shares.

"We reserve the right to take legal action against any investor in YPF or its assets that have been illegally expropriated from Repsol," company spokesman Kristian Rix told AFP in April, without elaborating.

"Repsol should think carefully before attempting to attack YPF," Mr Carreno countered. "We are not threatening anybody. What we are doing is being consistent with our approach, and we are not going to trample over the Argentine company."

Argentina announced in April it was taking control of YPF, seizing a 51pc stake from Repsol, a decision cheered by Venezuelan President Hugo Chavez.----

Source: http://www.telegraph.co.uk/finance/newsbysector/energy/oilandgas/9455032/Argentina-to-use-YPF-to-search-for-Falkland-Islands-oil.html