Cairn Energy discovers gas in offshore Greenland

Cairn Energy discovers gas in offshore Greenland

London: Scottish explorer Cairn Energy said Tuesday it had discovered gas in offshore Greenland, amid environmental protests by Greenpeace to stop its oil operations near the nation’s fragile coast.

Cairn revealed the discovery alongside news of a return to profit in the first half of 2010, and uncertainty over its recent deal to sell a majority stake in its Indian unit, Cairn India, to mining group Vedanta.

Profits after tax stood at $27.7 million (€21.0 million) in the six months to the end of June, which compared with a net loss of $76.1 million in the same part of 2009, Cairn said in a results statement.

Cairn added that it has “encountered gas" in thin sands at its first well in Baffin Bay, offshore Greenland, with indications that there may be other hydrocarbon resources in the area.

“I am encouraged that we have early indications of a working hydrocarbon system with our first well in Greenland, confirming our belief in the exploration potential," said chief executive Bill Gammell.

Greenpeace said Monday its activists have arrived in the Arctic on board one of its ships to pressure Cairn to stop oil operations in offshore Greenland, which is home to blue whales, polar bears, seals and migratory birds.

If the group’s prospecting is successful, the Arctic “could be flooded with oil companies, all trying to operate in hazardous polar conditions", Greenpeace had said in a statement.

However, the exploration firm, which is drilling two wells off the west coast of Greenland, responded that it complies with “some of the most stringent regulations globally" that are laid down by the Greenlandic government.

News of the Greenland find comes one week after Vedanta agreed to pay up to $9.6 billion for a 51-60% stake in Cairn India, whose biggest asset is the oil-rich Mangala field in the western state of Rajasthan.

Cairn Energy, which is based in Edinburgh, hopes that the Vedanta deal will provide fresh funds for the drilling programme in Greenland and allow it to return cash to shareholders.

“In line with Cairn’s long-held strategy of adding and realising value, the transaction with Vedanta will result in a substantial return of cash to shareholders whilst ensuring the company has the financial flexibility to pursue its ... exploration strategy in Greenland," added Gammell on Tuesday.

The Vedanta deal is in the balance as Indian media report that the country’s state-run fuel companies may make a counterbid for Cairn India oil assets.

The Press Trust of India reported Monday that state-run companies Oil and Natural Gas Corp (ONGC), OIL India Ltd (OIL) and GAIL have already lined up 10 billion dollars in loan commitments from international banks for a possible counter-bid for Cairn India assets.

The three firms have held informal talks as Indian authorities examine legal options to deny Cairn approval for conclusion of its deal, the agency said, quoting sources with knowledge of developments.

The report came as India’s oil minister Murli Deora said the government was still undecided on whether to push for a state takeover of Indian oil assets owned by Cairn Energy.

Cairn India’s share price surged by nearly 6.0% Tuesday in Mumbai on the prospect of a bidding war. Cairn Energy’s share price slipped 1.16% in early London trade and Vedanta slumped 5.74%.

Vedanta’s stock was hit hard after India’s environment minister Jairam Ramesh rejected Vedanta’s controversial plans to build a mine on land held as sacred by an Indian tribe.