ForPower.com

The Scottish company Cairn Energy announced on Tuesday that they were abandoning drilling on their second exploration well off the coast of Greenland. The decision was prompted due to the failure to find any oil or gas in the Gamma-1 exploration well.

This is the second well that the company has been forced to abandon. Cairn has already abandoned drilling on the LF7-1 well and suspended drilling on the AT7-1 well. Its rig will now be moved to the Delta-1 well although the company has already stated that any indications of oil or gas in this well are minor. The company commented:

“The well has so far encountered several hundred metres of Tertiary volcanic section, which is thicker than anticipated and with only minor hydrocarbon indications.”

After exploring the Delta-1 well the company will then move the Leiv Eiriksson rig back to the AT7-1 well to recommence exploration. Cairn has a total of five wells in the area as part of its project which is likely to cost about 450 million Euros (£400m).

Cairn’s Chief executive, Simon Thomson, commented: “The full results of the Gamma-1 well and the update from the Delta-1 well will be reviewed in the context of all the data gathered during the Greenland exploration campaign.

"The rigs are scheduled to move south to drill the final two wells of the programme on the Atammik block. We remain focussed on the potential of our multi-basin position in Greenland.”

This latest setback illustrates the difficulties of drilling in such a harsh environment. Although explorers believe that there could be vast amounts of oil off the coast of Greenland, the unexplored terrain makes discovery difficult. Because of severe weather conditions Cairn can only drill for the warmest three months of the year.

In addition to the challenges presented by the climate, Cairn Energy has also faced opposition from Greenpeace. Demonstrators boarded one of the rigs earlier in the year in protest against the drilling. Greenpeace’s concerns relate to Cairn’s ability to deal with an oil spill in the area and they have approached the company to question what steps they would take in such an eventuality.

A spokesman for Greenpeace 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.”

As Cairn Energy faced an 8% drop in shares from 313p to 287p a representative from the investment bank Evolution Securities commented:

"It looks increasingly unlikely that the expensive Greenland drilling programme will prove to be the hoped-for exploration bonanza."

Diane Mannion