DES Desire Petroleum

Argentina President Cristina Kirchner pledged Thursday to continue the economic and social policies that analysts say helped her to win a landslide re-election last year.

In her first address to Congress since she was sworn in on Dec. 10, Kirchner offered up little in the way of significant policy changes or legislation.

On the legislative front, Kirchner asked Congress to change the central bank's charter to give the bank greater power to regulate the financial sector.

Kirchner will have a free hand in passing most legislation--short of a constitutional amendment--during the next two years after her faction of the ruling Peronist movement and its allies won a working majority in both houses of Congress last October.

The popular 59-year-old leftist won a second term with a record 54% of the vote as Argentines rewarded her for the political stability and economic prosperity they have enjoyed since she took office in 2007.

The speech came as a relief for Argentina's largest oil and gas producer, YPF SA (YPF, YPFD.BA), and its controlling shareholder Repsol YPF SA (REP.MC).

Local media had speculated for weeks that Kirchner would announce a partial or full-blown takeover of YPF amid a tense standoff between her administration and the energy industry.

Kirchner has put increasing pressure on the oil industry in recent months as rising fuel and natural-gas imports erode the country's trade surplus.

The administration has accused oil and gas companies of failing to invest enough in exploration, production and refining. Administration critics, including eight former energy secretaries, said price caps and government regulations are to blame for limited investment and declining output.

YPF's shares traded in New York extended their gains following Kirchner's address, and were recently trading 16.1% higher at $30.46. The shares fell 14% on Wednesday as investors feared the worst.

Kirchner dedicated the last 15 minutes of her more-than-three-hour speech to Argentina's long-running dispute with the U.K. over the Falkland Islands.

Kirchner said she has instructed her ministers to contact the stock exchanges where the shares of fishing and oil-exploration companies that operate in the Falklands are listed to warn them of the risks those firms are incurring by extracting resources claimed by Argentina.

Since 2010, London-listed Falkland Oil & Gas Ltd. (FOGL.LN), Rockhopper Exploration PLC (RKH.LN) and Desire Petroleum PLC (DES.LN) have been exploring for oil in the waters off the Falklands.

Kirchner also said her administration will renegotiate an agreement with the U.K. that allows a weekly commercial flight operated by Lan Airlines (LFL) between Chile and the Falkland Islands to land twice a month in Rio Gallegos, Argentina.

"Instead of two flights, we are going to negotiate three flights, but leaving from the continental mainland, from Buenos Aires, on our flagship carrier Aerolineas Argentinas," she said.

Argentina has long demanded the return of the Falklands, which have been under British control since the early 1830s, as well as South Georgia and the South Sandwich Islands in the South Atlantic. The two nations fought a brief but bloody war for control of the islands in 1982 that ended in a stinging defeat for Argentina.

Since winning re-election, Kirchner has become increasingly vocal at home and abroad in pressing Argentina's demand that the U.K. negotiate the sovereignty of the remote islands.

Meanwhile, the discovery of oil off the Falklands has given an added sense of urgency to Argentina's calls for bilateral talks.

Kirchner has also stoked nationalistic passions in recent weeks ahead of the 30th anniversary of the Falklands War.

-By Ken Parks, Dow Jones Newswires; 54-11-4103-6740, ken.parks@dowjones.com

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