By Helen Popper

STANLEY, Falkland Islands (Reuters) - Few people are tracking the ups and downs of the British companies looking for oil off the disputed Falkland Islands as closely as islanders themselves.

The search for black gold in South Atlantic waters claimed by Argentina has even persuaded some residents to dabble in the stock market as they bet on a windfall that could guarantee their small community's prosperity for decades to come.

Weekly newspaper the Penguin News still lists international prices for wool - the mainstay of the Falklands' economy until Argentina and Britain went to war over the islands 30 years ago. The sale of fishing licenses has made them wealthy since then.

But in a sign of where many islanders now see their future economic well-being, the share prices of oil exploration companies are displayed on the front of the newspaper's website.

"We knew people were following the share prices ... you hear people chatting on the street about it so it seemed a good idea to put them there," said Penguin News editor Lisa Watson.


Rockhopper graphic:

FOGL map:


The discovery by Rockhopper Exploration Plc of 350 million barrels of recoverable oil, which it plans to start pumping in 2016, fueled local investors' interest in the latest round of drilling to the south of the remote archipelago.

Rockhopper's find is small when compared, for example, with the 50 billion barrels thought to lie off Brazil, but is significant by the standards of fields like the North Sea.

It has also drawn intensified pressure from Argentina, which vowed earlier this month to sue the companies involved in oil drilling in the British-ruled territory.

Tensions between Britain and Argentina have risen as the April 2 anniversary of the 1982 war nears, stirring pro-British feeling in the islands, which are called the Malvinas in Spanish and have been claimed by Argentina since 1833.

President Cristina Fernandez, a center-leftist who hails from the chilly Patagonian region closest to the Falklands, has condemned "the plundering of our natural resources, our oil."

At government offices in the neat capital Stanley, officials are playing down the risks posed by Argentina's opposition.

"It's obviously generated discussion internally but we're in no doubt as to the legal position ... one country doesn't have the right to introduce legislation over another country," said Stephen Luxton, the government's director of mineral resources.

"Everybody here is very much behind success," he added.


Tax revenue is already getting a boost from oil exploration as local businesses provide logistical support to the offshore rig, helping shield the economy from the global slowdown.

Unemployment is zero in the Falklands and house prices have been rising, partly due to expectations of an oil boom.

Overgrown plots between the traditional tinned-roof cottages of Stanley are being cleared to make way for modern family homes and old Land Rovers are fast being replaced by shiny new models.

"GDP's growing, the transformational effect of oil is hopefully about to happen and the revenues that will flow into the government from (Rockhopper's) Sea Lion discovery alone will make the islands very affluent," said Roger Spink, general manager and director of the Falkland Islands Company (FIC), which dominates trade activities in the islands.

The FIC owns 12 million shares in Falkland Oil & Gas Ltd, next in line to drill to the south of islands after Borders & Southern Petroleum Plc finishes drilling two wells in the area.

Sea Lion, discovered in 2010 north of the islands, should generate $10.5 billion of tax and royalty revenues for the Falklands over its estimated 20-year life, according to a report last month by Edison Investment Research.

That could swell to $167 billion over the years if the four southern wells targeting 8 billion barrels of oil resources come in as hoped, Edison said.

That would be equivalent to $56 million for each of the Falklands' 3,000 inhabitants.

But as an isolated community long dependent on see-sawing global wool prices and years of neglect by London in the run-up to the war, officials say they are keeping their feet on the ground about the potential petro-dollar bonanza.

If the oil does start flowing, they say they would like to pay Britain for their defense costs and perhaps set up a sovereign wealth fund, with oil-rich Norway serving as a model.

"Until we see oil flowing, revenue coming in, we take no notice of it," said Roger Edwards, chairman of the Falklands' eight-member elected assembly.

"There's an awful lot of infrastructure that we need to put in place before we ever consider going for silver and gold linings and gilt edges," said Edwards, a sheep farmer from the sparsely populated island of West Falkland.

At the Penguin News, there are no plans to scrap the weekly wool market report - especially at a time when robust demand for the islands' high-quality fleeces is cheering local farmers.

"There's still great interest in it," Watson said. "There's a lot of money being made there too."

(Editing by Eric Walsh)