Cairn confirms Greenland oil find

August 25, 2010 12:05 am | Updated November 05, 2016 07:51 am IST

Cairn Energy has confirmed that it has discovered gas and potential indications of oil off the coast of Greenland in a move that will heighten fears of environmental campaigners that the Arctic is set to become the scene of the world's last great dash for oil.

Greenpeace's ship Esperanza is already in the area, protesting against the actions of Cairn, the first company permitted to drill for oil in the sensitive environment. Earlier this week it was challenged by a Danish warship whose captain is enforcing a 500-metre exclusion zone around the two wells.

Environmental campaigners fear that drilling in the previously untouched Arctic area raises the risk of an environmental disaster on the scale of the Deepwater Horizon spill in the Gulf of Mexico. The oil industry, however, will welcome Cairn Energy's announcement as confirming their suspicions that the Arctic harbours one of the world's last remaining major reserves of oil.

In a statement accompanying its half-year results, Cairn Energy said one of its two exploration wells in Baffin Bay, which is of a similar scale to the North Sea, has found “gas in thin sands” which “is indicative of an active hydrocarbon system”. The well in question — T8-1 — has not yet reached its target depth. Cairn Energy has plans for four wells in its current drilling programme. The company is also carrying out 10,000 kilometres worth of seismic surveying.

But shares in Cairn were down almost two per cent in early trading on disappointment that the company had not made a firm discovery of oil.

Chief executive Sir Bill Gammell admitted that the gas discovery does not have commercial potential, but stressed that its discovery is positive because it is of a type often associated with oil finds. He said the company will be exploring in the area for some time to come.

“We are drilling in a basin the size of the North Sea and in a block the size of the Niger Delta. It's a marathon, not a sprint,” he said.

Safety measures

Cairn's deputy chief executive and exploration chief Mike Watts stressed that the company is taking every precaution to prevent an environmental accident in the region. It has two drilling rigs, which means that in the event of an incident along the lines of the Deepwater Horizon blowout the second rig can immediately drill a relief well. In addition, the drilling schedule has been designed in such a way that at critical junctures only one rig enters a hydrocarbon-bearing section at any given time.

“We have got extensive well control and risk management in place,” said Watts. “We designed the well to minimise the risk of any uncontrollable influx” of the type that caused the Gulf of Mexico spill.

Last week, it announced plans to sell its 51 per cent stake in Cairn India to Vedanta Resources for £5bn in order to help the Greenland exploration.

Three Indian government-owned firms, however, are reported to be interested in making rival offers for the stake. — © Guardian Newspapers Limited, 2010

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