Sir Bill Gammell, the chairman and founder of oil explorer Cairn Energy, has vowed to continue the company’s controversial quest for oil off the coast of Greenland, despite the search currently drawing a blank and pushing the company into a $1.2bn (£693m) loss last year.
The former Scotland rugby international said he was “convinced” about the potential of the area, despite a $942m charge for unsuccessful exploration costs, and insisted: “Whilst we have to date not established commercial quantities of hydrocarbon, we remain convinced that all of the ingredients for success in Greenland are present.”
The comments came a week after the company was called to give evidence to a Commons select committee investigating exploration of the Arctic, and follows months of criticism by environmental groups about its plans.
Ben Ayliffe, from Greenpeace, said: “Cairn Energy’s luckless pursuit of oil in the Greenland Arctic has delivered zero barrels and a handful of dry holes at a price of over $1bn. With such misplaced optimism in drilling one of the planet’s most challenging and pristine environments, it’s little wonder the company has been dropped from the FTSE 100 and is selling off chunks of its licence blocks to balance the books.”
Cairn, which launched its campaign in Greenland in 2007, will switch its focus to a licence in the Baffin Bay area of offshore Greenland in 2012 with Norwegian explorer Statoil, which is a 30% partner in the block. It argues that its recent demotion from the FTSE 100 was triggered by its success in selling a 40% stake in its Cairn India subsidiary to miner Vedanta Resources, which resulted in $3.5bn being returned to shareholders. It will now attempt to replicate that result in other parts of the world.
Despite the returns from India, the transaction also ended with the company performing an embarrassing U-turn as pressure from investors forced it to abruptly drop plans to award Gammell £2.5m of free share options. The company said on Tuesday that after further consultation with shareholders, it was “not going to proceed with a share award” to Gammell.
While the company reported the $1bn loss on its existing business, the sale of the Indian assets meant the company reported an overall profit of $4.6bn in the year to December, compared with $1.1bn the previous year.
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