Scotland business

Cairn Energy and Faroe Petroleum win Norwegian drilling licences

An oil rig worker in the North Sea Image copyright Getty Images

Two Scottish oil exploration firms have won licences to drill in Norwegian waters.

Cairn Energy and Faroe Petroleum were both successful in the most recent round of licence awards.

They were among 36 drillers included in the round, for 56 different blocks of sea - nearly half of them in the North Sea and the others to the north of Norway, in or near the Arctic Circle.

UK firms Tullow Oil and Centrica also won rights to drill for oil and gas.

Shell and BP won small numbers of licences, reflecting their reduced activity in the North Sea.

Biggest winner

The energy minister in Oslo said the number of awards showed the continued appeal of drilling in the country's waters.

There has recently been significantly more success in drilling there than in UK waters.

However, the award of licences is no guarantee that the companies will drill, as many have held back investment while the oil price remains low and volatile.

Statoil, two-thirds owned by the Norwegian government, was the biggest winner of licences, with at least a share in 24 of them.

Faroe Petroleum, headquartered in Aberdeen, has been named as operator in one block while having a share in operations in five others.

The company recently reported a sharp rise in the calculation of its oil and gas reserves, and started a new drilling programme in Norwegian prospect.

'Positive tests'

Edinburgh-based Cairn Energy has entered the Norwegian exploration market, through its North Sea subsidiary Capricorn, with one operator licence and a non-operating share in four others.

In a market update on Wednesday, the company highlighted positive signs from appraisal drilling, codenamed SNE, off the coast of Senegal, west Africa. It is working there with ConocoPhillips.

Chief executive Simon Thompson said: "Cairn is delighted with the positive flow tests on the SNE-2 appraisal well confirming the commercial deliverability of the SNE discovery.

Image copyright Cairn Energy

"Further appraisal activity this year will test the overall scale and extent of the resource base in Senegal, and is expected to lead to revision of the resource estimates.

"Drilling operations on the next appraisal well, SNE-3, are now under way."

The update from Cairn said the company had given back licences it was awarded for drilling off the Morocco coast. It has paused its plans for the west of Ireland, while in discussions with business partners and the Dublin government.

The large Kraken field, in the UK North Sea, in which Cairn is a partner, is expected to come on-stream with a 10% reduction in its investment budget, due to cost-cutting across the offshore sector.

A long-running dispute over tax with the Indian authorities is now moving, slowly, to international arbitration.

Since it began, the value of Cairn Energy's remaining stake in the vast oilfield it discovered in western India has fallen from about $1bn to less than $400m. It is seeking compensation for that loss from the Indian government.

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