Diplomatic tensions with Argentina over the Falklands are rubbing salt into the wounds of investors who poured millions into an offshore quest for oil and natural gas that remains disastrously futile.

Another oil prospecting company, Borders and Southern, pulled out of the multimillion-dollar exploration into the depths of the Falklands' South Atlantic waters, causing equity losses across the board, hitting operators that remain upbeat and recently secured new funding for further search.

Borders and Southern investors saw their equity values drastically reduced after the company it would abandon its exploration program after it drilled unproductive wells.

The company's scheduled departure leaves Falkland Oil and Gas into the fray and the Leiv Eiriksson rig reassigned to FOGL to continue further drilling into the Atlantic Ocean's East Falkland basin.

Borders and Southern was looking for oil in areas that weren't only far too deep but also away from the main islands of the British overseas territory. The company didn't reveal the results of a gas condensate discovery reported earlier.

The Borders and Southern announcement was potentially less traumatic for its investors than a previous fiasco when Desire Petroleum PLC raised hopes with premature reports on its drilling results, only to report later what it found wasn't oil but water.

Analysts said the news of Borders and Southern would disappoint not only the British-backed companies active in the Falklands waters but set back Argentine government efforts to mount a competing exploration in Argentine waters skirting the Falkland basin.

Argentina is continuing a vigorous campaign against all shipping bound for the Falklands and sees its exploration as part of a plan to "tighten the noose" around the British territory.

Argentina invaded Falklands in 1982, claiming it as its territory, but was repulsed by British forces in a 74-day war that cost about 1,000 lives. Argentina surrendered formally but didn't abandon its claim on the islands, which it calls Malvinas.

Britain has rebuffed repeated Argentine moves to make the Falklands an international topic for negotiation. In a verbal exchange, British Prime Minister David Cameron declared, "As long as the Falkland Islands want to be sovereign British territory, they should remain sovereign British territory -- full stop, end of story."

Argentine President Cristina Fernandez de Kirchner called Cameron arrogant, accusing him of "mediocrity and almost of stupidity."

In a further escalation Argentine navy ships have been boarding third party vessels, including Spanish fishing boats with no apparent links to the Falklands oil exploration.