The Falkland Islands have insisted that the UK government has no say on whether the Sea Lion oil project should go ahead.

Some 800 million barrels of oil are believed to be contained in the Sea Lion basin, which lies 150 miles north of the South Atlantic archipelago.

Rockhopper Exploration, the company licensed to drill for the oil, believes the basin could eventually yield as much as 1.2 billion barrels after another field was discovered nearby.

The project is predicted to generate £4 billion for the 3,700 Falklanders over the next 35 years, equivalent to around £1m per islander.

It will also provide great opportunities for UK firms, according to the island’s government.

Teslyn Barkman, a member of the Falklands Legislative Assembly, told the Express that around £750 million would go directly to British companies during the first two phases of development, as well as creating over a thousand jobs for locals.

However, any decision to go ahead with the project could bring the islanders into direct conflict with the Labour government, which is looking to phase out fossil fuels.

Energy Secretary Ed Miliband placed a block on all new oil and gas licences in July, days after Labour came to power.

The Falklands government, though, insists the matter is for the islanders to decide and not Downing Street.

A spokesperson for the Falkland Islands’ government said: “We completely appreciate the UK’s stance on climate change and understand their position on prohibiting any new hydrocarbon licensing within the UKCS [UK continental shelf], while existing licences are honoured.

“The matter of development of the natural resources of the Falkland Islands is a devolved matter and is for the people of the Falkland Islands to decide.

“Given the UK’s robust and continued support to uphold the Falkland Islanders right to determine their own future we would expect this to extend to our freedom to choose whether or not to develop a hydrocarbon industry, subject to all of the appropriate checks and balances.”

In its manifesto, Labour said the climate and nature crisis was the greatest long-term global challenge the country faced.

The government is set on reducing UK carbon emissions and transitioning the country towards clean energy.

The Foreign Secretary David Lammy reinforced that commitment recently, saying: “Action on the climate and nature crisis will be central to all that the Foreign Office does.”

Although the UK is responsible for foreign affairs and defence in the Falklands, the island’s government is in charge of the day-to-day running of the British Overseas territory.

A Foreign Office spokesman told the Telegraph it would be offering no financial support for the project.