UK oil firm Cairn Energy is getting together with Norway's Statoil to explore for oil and gas in Greenland.
Cairn announced Monday that it has entered into a "farm down" agreement with Statoil for the Pitu block in the Baffin Bay Basin, west of Greenland. The deal will see Statoil acquire a working interest of 30.625 percent in the Pitu license, with Cairn retaining operatorship and a 56.875 percent interest (Nunaoil holds an ongoing 12.5 percent interest in the block).
The exact financial terms of the deal were not disclosed.
After a number of failed drill attempts to find hydrocarbons in Greenland, Cairn believes that Statoil's background of exploring for oil in the Arctic will improve its chances of success in the region.
"In Greenland, Statoil's extensive Artic operating and development experience makes them the partner of choice for the Pitu block where we see significant potential," said Simon Thomson, Cairn's Chief Executive.
So far, Cairn has acquired 580 square miles (1,500 square kilometers) of 3D seismic data over part of the Pitu block and this is currently being processed with fully-migrated results expected in the second quarter of 2012. Cairn's view is that the results of a sea bed sampling program from last year confirm new geochemical anomalies at the sea bed above the prospective areas identified on the 2D seismic.
Bank of America Merrill Lynch commented that Statoil's harsh environment expertise, and recent Barents Sea exploration success, should indeed reduce the perceived Greenland risk. "This is just the beginning of Cairn's de-risking of its Greenland acreage and we expect additional farm downs, both in Pitu and in the South Greenland blocks," stated the investment bank in a research note on Cairn Monday.
Elsewhere, Cairn reported that its Mangala field in India is currently producing at 125,000 barrels of oil per day with potential to produce 150,000 bopd subject to regulatory approval. The firm also confirmed that its Bhagyam field has begun production and is being ramped up to achieve 40,000 bopd.
Cairn retains an interest of 22 percent in Cairn India, after the completion of a 40-percent stake in the subsidiary to Vedanta in December.
Meanwhile, Cairn also confirmed that it is actively pursuing more acreage in Spain, where the government awarded Cairn two hydrocarbon exploration permits in January last year.
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