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Cairn draws a blank at second Arctic well

Doubts over Cairn Energy’s £400m Arctic drilling venture after it abandons second well

Cairn Energy, the Edinburgh-based oil and gas explorer, is abandoning a second well in Greenland, it said on Tuesday , after its controversial venture to find oil in the Arctic again drew a blank.

The Gamma-1 exploration well off the west coast of Greenland, within the Arctic circle, found no oil or gas.

It is a second serious blow to Cairn’s Greenland exploration efforts. The company is drilling five wells in the region in a project costing £400m. Cairn said in August a well further south had proved barren.

The chief executive, Simon Thomson, said the firm was still “focused on the potential of our multi-basin position in Greenland”.

Will Arnstein, analyst at FinnCap, said it was “obviously a disappointing result. Gamma was the biggest and most significant prospect in the drilling programme.”

He said it would raise doubts in the market about the direction of the company, and whether it should continue to spend more money drilling in the Arctic.

Richard Griffith of Evolution Securities said: “It looks increasingly unlikely that the expensive Greenland drilling programme will prove to be the hoped-for exploration bonanza.”

Cairn has been an early mover in Greenland drilling. It is only possibly to drill for three months of the year within the Arctic Circle due to the extreme cold.

Greenpeace has suggested an oil spill in the region would be all but impossible to deal with, and has pressed Cairn to reveal what it would do in the event of a spill.

The activist group said that Cairn was “a bad bet. It has spent hundreds of millions drilling in the fragile Arctic environment and come up dry yet again. Cairn couldn’t deal with an Arctic spill and the coast of Greenland would be wrecked.”

Cairn shot to prominence in the market in 2004 when it emerged that it had found huge reserves in Rajasthan, in India. Its revenues continue to come predominantly from its oil finds there.

The company also said a further well in the Greenland area, Delta 1, was not looking promising: “The well has so far encountered several hundred metres of Tertiary volcanic section, which is thicker than anticipated and with only minor hydrocarbon indications.” The equipment being used on the Delta and Gamma wells will move south to complete the rest of Cairn’s exploration in Greenland.

Shares in Cairn dropped 8%, down 26p to 287p.

Cairn’s failures came in sharp contrast to Tullow Oil’s success last week. A joint venture between Tullow and Royal Dutch Shell found oil off the coast of French Guiana estimated at up to 700m barrels. © 2011 Guardian News and Media Limited or its affiliated companies. All rights reserved. | Use of this content is subject to our Terms & Conditions | More Feeds