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Our Arctic Neighbors: Race on for Greenland oil and gas Cairn’s second exploration well encounters oil in 1,312-foot section, confirms active, working hydrocarbon system in Baffin Bay Kay Cashman Petroleum News
The race for oil and gas offshore western Greenland is off to a good start with the first explorer in three decades finding gas shows in its first two wells, and oil “intermittently” in a 1,312-foot section of the second well. The wells are in the iceberg-filled stretch of water between Greenland and Canada’s Nunavut.
“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, chief executive of Cairn Energy PLC, in a Sept. 21 press release from the Edinburgh-based company.
The second well — the Alpha-1S1, with the oil show — in Baffin Bay had been drilled to 14,298 feet, but Cairn said it was continuing to drill, going deeper.
“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,” Cairn said in its press release.
First well plugged and abandoned The announcement spurred a 3 percent increase in Cairn’s share price, which had fallen by 8 percent since August when the company said its first offshore western Greenland well, T8-1, showed only small quantities of gas.
Cairn has since plugged and abandoned that well, booking an $84.2 million write-off.
“I see this as a positive result in the context of the longer-term exploration story offshore Greenland and I think the ... share price before this morning did not actually reflect any of that upside,” Phil Corbett, an analyst with the Royal Bank of Scotland and Cairn’s house broker, was quoted as saying in a Sept. 21 Reuters report out of London.
According to consultancy Wood Mackenzie, Greenland, a self-governing territory of Denmark, is one of the world’s largest under-explored frontier areas. Wood Mackenzie estimates there could be more than 20 billion barrels of oil equivalent in the country.
Energy consultancy IHS Cera has put Greenland’s technically recoverable undiscovered resources as high as 50 billion boe.
Cairn selling India unit to raise funds Cairn is in the process of selling a majority stake in its Cairn India unit to Vedanta Resources for about $8.5 billion. Some of the funds from the sale, which is waiting on approval from India regulators, will be spent on Greenland exploration.
Cairn is currently drilling a third well, T4-1, in Baffin Bay.
The company’s offshore leases cover approximately 72,000 square kilometers with water depths ranging from 164 feet to 1.4 miles.
Keen interest from majors As the world’s largest island, with a population of just 56,000, Greenland is emerging as a potential petroleum giant with competition between oil companies for its resources intensifying.
Although Cairn’s discovery does not appear to be commercially viable, it strengthens the belief that offshore western Greenland has oil and gas potential. Until Cairn’s wells, there had only been seven exploration wells in the region and they were all dry.
Ove Karl Berthelsen, Greenland’s minister for industry and mineral resources, described Cairn’s results to date as encouraging, saying they support “earlier indications of the existence of an active hydrocarbon system in the region.”
The three wells are the first of four the small Scotland-based producer was scheduled to drill this summer as part of a multiyear exploration campaign that in May Bloomberg reported would be closely watched by producers such as ExxonMobil, Shell and Chevron, which also hold rights offshore western Greenland.
ExxonMobil and Chevron are currently interpreting seismic data to identify potential drilling locations. Kerr says economic to develop at $75 oil Cairn’s Sept. 21 announcement was made about two weeks before the government of Greenland was expected to announce the winners in its latest licensing round for 14 blocks spanning 58,301 square miles in Baffin Bay.
Greenland’s Bureau of Minerals and Petroleum said it had received 17 bids from 12 international oil companies, including Shell and Statoil. (Cairn bid on six blocks, which vary in size from 3,088 square miles to 5,792 square miles.)
Another bidder, Scott Kerr, chief executive officer at the Norwegian Energy Co., said his company believed “with the estimated size of resources in Greenland it would be economic to develop at over $75-a-barrel oil prices, but this depends on the reservoir quality, the field’s size, and distance from shore. There are big differences in the size of resources because little exploration has been done.”
The next oil and gas exploration leases will be offered in the Greenland Sea in 2012 and 2013.
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