Oil firm Premier Oil said it was to acquire a stake in an oil development project in the Falkland Islands as part of a $1 billion deal with explorer Rockhopper.

Premier said today it would pay Rockhopper an initial $231 million in cash as well as providing around $770 million to help build the infrastructure to get oil pumping from the explorer’s Sea Lion discovery.

The discovery of oil in the Falkland Islands in 2010 has angered Argentina and verbal sparring over their sovereignty has gathered pace over the last twelve months, with Argentina threatening companies involved in oil in the Falklands with legal action.

“Rockhopper has made excellent progress in commercialising the Sea Lion project which offers attractive returns and fits well with Premier’s proven operating and development skills,” Premier’s Chief Executive Simon Lockett said in a statement.

The companies said that Premier would acquire a 60% stake in the license, with Rockhopper owning the remaining 40%.