The Argentine Embassy in London tonight issued a statement warning British companies and individuals they face prison sentences of up to 15 years.
Fines equivalent to the value of 1.5 million barrels of oil–about £100million at current prices–would also be levied.
The move by Buenos Aeries is a major ratcheting of the tension in the region and has triggered a furious response by the Foreign Office reminding Argentina that the Falklands are British sovereign territory.
The new law means companies would also be banned from operating in Argentina and any oil found or exploration equipment would be confiscated.
The statement said the Argentine Embassy in London has already sent more than 200 letters to companies directly or indirectly involved and “warning them they are liable to administrative, civil and criminal actions in accordance with the laws governing such activities, including environmental protection laws”.
Argentina, which has previously made formal protests to London on the issue, believes exploration is “manifestly contrary to Resolution 31/49 of the United Nations General Assembly”.
Its statement said: "Early this morning the Argentine Congress passed a law establishing criminal sanctions to be imposed on companies and individuals involved in the illegal exploration and exploitation of hydrocarbons in the Argentine continental shelf.
“The law provides for prison sentences for the duration of up to 15 years; fines equivalent to the value of 1.5 million barrels of oil; the banning of individuals and companies from operating in Argentina; and the confiscation of equipment and any hydrocarbons that would have been illegally extracted.
“The Argentine Embassy in London has already sent over 200 letters to companies directly or indirectly involved in the aforementioned activities warning them that they are liable to administrative, civil and criminal actions in accordance with the laws governing such activities, including environmental protection laws.”