Scotland’s Cairn Energy finds oil off Greenland, but warns further analysis needed

By Robert Barr, AP
Tuesday, September 21, 2010

Scottish driller finds oil off Greenland coast

LONDON — A Scottish oil company said Tuesday it has found oil for the first time in its exploration off Greenland, but it has abandoned an earlier well which caused a flurry of excitement when the company encountered gas.

Cairn Energy PLC said it found oil “intermittently” in a 400-meter (1,300-foot) section of the Alpha-1S1 well which has now gone 4,358 meters deep.

“Initial geochemical analysis of various hydrocarbon samples recovered from the well … confirms the presence of two oil types which have different origins and levels of maturity and are the first oils encountered in the current exploration campaign. Further geochemical analyses are ongoing on a number of oil samples,” the company said.

Cairn Energy shares closed up 2.3 percent on the London Stock Exchange.

“The presence of both oil and gas confirms an active, working petroleum system in the basin and is extremely encouraging at this very early stage of our exploration campaign for the Sigguk block and the entire area,” said Bill Gammell, the company’s chief executive.

Ove Karl Berthelsen, Greenland’s minister in charge of mineral resources, said it was “another encouraging result.”

Cairn said it has plugged and abandoned its first test well, T8-1, which hit gas but no oil. The company said the volume of gas found in that well was not commercially viable, and it is writing off the $84 million cost of that bore.

Richard Griffith, analyst at Evolution Securities, said the two “exploration wells have both proved the presence of hydrocarbons offshore Greenland. However, as was always likely with 1 in 10 chances of success wells, neither well is a commercial discovery.”

“This outcome may be disappointing immediately but in a broader context it does not mean the province is a write off.”

Drilling for oil and gas in the deep ocean off Greenland’s west coast resumed in 2001, three decades after a previous effort failed to find petroleum.

Edinburgh-based Cairn Energy started drilling 108 miles (175 kilometers) west of the Disko Island on July 1. In August, it won permission to drill two more deep-water exploration wells off the semiautonomous Danish territory.

In early September, four Greenpeace activists got on to the Stena Don rig and stopped drilling for two days before they were arrested and removed.

AP reporter Jan M. Olsen in Copenhagen contributed to this report.

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