It used to be said that Falklands society was like the Archers with foreign policy. That is no longer true: it's more like Dallas.

Go out for the evening in Port Stanley and you are likely to find yourself associating with a high octane mix of characters: high-rolling local and international businessmen, journalists and plain old-fashioned chancers; all the types one would find in any frontier zone where the smell of wealth hangs enticingly in the air.

Port Stanley is not Azerbaijan, so there are no murky Mafia types. Neither is it Aberdeen in the 1970s and 1980s, so there are no Stetsons. But the same whiff of opportunity is there, and it does seem that just one breakthrough in the next year or two �?quite possibly an oil strike �?could tip the islands over into the big time.

Oil companies like Falklands Oil and Gas and Desire Petroleum, all of which were set up specifically to explore off the Falklands, have been collecting seismic data about the seabed to the north and south of the islands for years, and have identified the prime sites. Dr Colin Phipps, who was involved in the early days of North Sea exploration, is the Chairman of Desire Petroleum, and he insists that he is frustrated only by a global shortage of oil rigs:

"That could change at any time, and we are actively looking for a suitable rig."

He acknowledges his company still needs a partner to fund a rig, which could cost US$500,000 a day to hire. But if all the companies work together, he insists it can be done.

Signs of hydrocarbons

Exploratory drilling nine years ago revealed signs of hydrocarbons, and such is the body of knowledge about the area that geologists retained by the Falklands Government believe the chances of success are one in five �?about as near to a dead cert as you can get in the oil industry:

"It's still frontier territory," acknowledges the British Geological Survey's Falklands expert Dr Phil Richards, "but it's a huge area of relatively shallow water. The sexy areas are a big band to the south and a smaller area to the north."

Oil, if it happens, will just be the latest phase of a remarkable economic success story. Currently the biggest earner is fishing. The Islanders don't much like the squid that teem in their coastal waters, but the Spanish, Japanese, Koreans, Chinese and Taiwanese are happy to pay big money for licences and go into business with local companies to hoover them up. The Falklands Government will gross about £20m this year from the sales of licences �?about 42 per cent of its total income.

Tourists' £10m spend

Tourism is becoming another major industry. The annual spend by the rapidly growing number of cruise ship passengers who visit is estimated at £10m. Conveniently placed on the busy cruising route to Antarctica, ships call at Stanley to soak up the British atmosphere (red telephone boxes, bobbies and even a Routemaster bus), and visit remote nature reserves to see charming penguins, albatross and seals.

Around 40,000 people visited Stanley last summer, many signing up for coach excursions to sheep farms. Some farmers now make far more money from entertaining visitors than they do from shearing sheep. Meanwhile, in Stanley's shops, which are stuffed with toy penguins, locally-made preserves, and post cards, you can hardly hear the wind for the jingling of the tills.

So where did all this begin? To quote Chris Simkins, the Falklands Government's Chief Executive, "With the road to oblivion; a community dependent on handouts."

He refers to the Falklands in the years immediately before the conflict of 1982, when they suffered from the combination of global economics, British neglect and Argentine malevolence. It was a demoralised and dying community, dependent on dwindling wool sales and the sale of postage stamps. The conflict saved the Falklands.

When the fighting was over, Whitehall had to make the islands viable. First there came full political power, with elected islanders taking on all responsibilities other than defence and foreign affairs. Then came expertise to develop the islands, and, finally, came the crucial ingredient: a maritime economic zone and the right to sell those fishing licences.

As Kim Howells, the junior Foreign Office Minister with responsibility for the dependent territories, said during a recent London conference about economic opportunities in the Falklands:

"That bloody conflict proved a catalyst for the islands. The growth of £5m to £35m in GDP is a very remarkable achievement."

Turning his gaze to the businessmen who had attended the conference curious to see what all the talk was about, the minister added:

"I hope you find the opportunities you seek."

Memories of the 1982 war

But was the minister wise to evoke the memory of the 1982 war? After all, the neighbours are still doing their level best to inhibit Falklands development. Long-term elected councillor and businessman Mike Summers shrugged it off:

"They think laying siege to the Falklands will bring us to the negotiating table," he said. "How wrong could they be? The economy is now robust enough to get through these difficulties. We have patience, and, as we have so far, we will succeed."

In all of this, the importance of security provided by the Falklands Garrison is not forgotten. None of the remarkable achievements of the last 25 years would have been achieved without the soldiers at Mount Pleasant, the sailors patrolling the coasts and the airmen watching their radars on mountain tops. With them, another quarter century of progress seems entirely possible.

All about... Facts from the Falklands

• annual gross domestic product of the Falklands is approximately £75m
• the Falklands have no national debt, but have reserves of around £180m
• the top rate of personal and corporate taxation is 25 per cent
• there is no value-added tax or death duty
• the population has grown by 50 per cent since 1982, but, at 3,000, is still tiny
• islanders contribute 4.5 per cent of their gdP to the cost of their defence
• medical treatment in a new hospital, also used by the military, is free
• serious medical cases may be flown to uruguay, chile or the uk for treatment
• education is compulsory to the age of 16, and children go on to uk universities