No one can be sure if Santa Claus exists, but oil and gas companies may soon find out as more of them head toward the North Pole in the search for new reserves.
Cairn Energy PLC plans to delay oil and gas exploration activity in the Mediterranean for a year to focus on operations in India, Greenland, and other areas.
Two Mediterranean wells Cairn had planned in the next 12 months will be deferred until 2010, says Cairn exploration chief, Mike Watts.
The deferral is partly because Cairn, which has exploration licenses in Tunisian waters, didn’t like the prices it was offered for drilling rigs, and wanted to focus efforts on other areas.
In India, Cairn is leading a development to export oil from several fields in Rajasthan, which will start up next year and are expected to reach plateau production of 175,000 b/d of oil.
India’s cash flows
But that’s not all. Cairn plans to use its cash flow from India to pay for drilling off Greenland starting in 2011. It expects to drill 10 exploration wells over 5 years at a cost of $1 billion.
If that sounds a little like a gamble, keep in mind that the US Geological Survey estimates there could be 50 billion bbl of oil and gas equivalent in Greenland’s largely unexplored waters.
Watts made his own optimism clear at a recent signing ceremony for two oil and gas exploration blocks off southern Greenland, saying the country represents a true frontier.
“There are many technical, operational, and environmental challenges ahead, yet the available evidence suggests that the offshore contains the geological ingredients necessary for finding hydrocarbons,” Watt said.
“In essence,” said Watt, “we are here today because we both recognize and believe in the potential of Greenland, and Cairn wants to play an active and catalytic role.”
Greenland’s ice floes
Watt is not alone in his thinking, as voters in Greenland recently backed a move for greater independence from Denmark, a move that includes national ownership of the island’s oil, gas, and other mineral resources.
Under the plan, Greenlanders will have more control over their natural resources by getting the first 75 million kroner ($12.6 million) of annual oil revenue. Any income beyond that would be shared equally between Greenland and Denmark.
The current agreement states that the first 500 million kroner ($84 million) of oil revenue should be shared equally, and that the division of any amount beyond that must be negotiated.
“The tears are running down my cheeks,” Greenland Premier Hans Enoksen said, adding that “We have said ‘yes’ to the right of self-determination, and with this we have accepted a great responsibility.”
“Our future is bright,” said Enoksen.
Who knows? Perhaps there really is a Santa Claus.