Cairn Energy has struck oil off the coast of Greenland, just weeks after an earlier exploration well found traces of gas in the region.
The latest strike found traces of oil and gas "intermittently" in a 400-metre section of rock in the Sigguk block near Disko island. The earlier well, which discovered non-commercial gas volumes, has now been sealed and exploration costs of $84m (£54m) written off. But the two finds are the first positive evidence of hydrocarbons in the region, and Cairn's shares shot up by 2.27 per cent to 436.5p yesterday.
Sir Bill Gammell, the chief executive of Cairn, said: "The presence of both oil and gas confirms an active, working petroleum system and is extremely encouraging at this very early stage of our exploration campaign."
Cairn is making a major bet on Greenland. The Arctic island – three times the size of Texas but home to just 57,000 people – is tipped as one of the world's largest undiscovered hydrocarbon reserves, with some analysts estimating it could hold as much as 20 billion barrels of oil and gas under its freezing coastal waters.
And Cairn is selling a 51 per cent stake in its Cairn India business to the miner Vedanta for $9.6bn (£6.2bn), with a view to ploughing money into its Arctic venture. "For the foreseeable future, it's Greenland, Greenland," Sir Bill said at last month's interim results.
Cairn's two discoveries are far from conclusive. But the company's progress is being closely watched. Cairn is the first to drill in the Baffin Bay Basin, an area the size of the North Sea off Greenland's west coast, but ExxonMobil and Chevron also have licences to explore the area. And the Greenland government is in the process of auctioning further licences.
BP has ruled itself out but 13 companies are said to have shown an interest in acquiring drilling rights, among them Shell, Statoil and Tullow Oil.
It is not only the oil industry with its sights on Greenland. The region is also set to be the next major battleground in big oil's on-going fight with environmental campaigners over deep-water drilling. Green groups claim that the risk of an accident in such hostile, iceberg-infested waters is high, and that the resulting pollution in such a cold, remote and pristine wilderness would be worse even than that from BP's Gulf of Mexico spill.
Greenpeace activists boarded Cairn's Greenland drilling rig at the end of last month to protest against its activities. Four people were arrested when they were forced off by bad weather.Reuse content