With drilling stalled in Gulf, Greenland sees ‘enormous interest’

By Gelu Sulugiuc and Christian Wienberg
Bloomberg News

Greenland’s energy bureau said it’s met “enormous interest” in licensing rounds planned for the next two years as rising oil prices and ice thaw fueled by global warming make Arctic exploration more feasible.

With crude oil trading close to two-year highs of about $90 a barrel and tighter legislation in the Gulf of Mexico threatening to hamper drilling there, oil companies are turning to less hospitable regions. Cairn Energy Plc started drilling off Greenland’s west coast last year and said it found two different types of oil in one of its wells.

“We are seeing enormous interest from the oil industry in the north east Greenland licensing rounds of 2012 and 2013,” said Joern Skov Nielsen, director of Greenland’s bureau of petroleum and minerals, at a press conference in Copenhagen today.

Cairn is planning a “multi-year exploration campaign” for oil and gas off Greenland’s shores, said Simon Thomson, a legal and commercial director for the Edinburgh-based company, at the same press conference. Cairn said this week it hired two rigs to drill four wells off Greenland in 2011. The Jan. 4 announcement sent its stock 2.8 percent higher. Other companies including Danish state-owned gas and oil company Dong Energy A

S had made six failed attempts at commercial discoveries in the past three decades.

Still, Greenland’s home rule government wants to ensure companies applying for licenses to drill its natural resources have the financial means to pay for the fallout of any spills, Nielsen said.

‘Lot of Money’

“Companies applying for licensing round must have a good environmental record,” he said. “They also have to have a lot of money. We want guarantees upfront that you can pay for cleanup and compensation in case of an oil spill.”

In April, an explosion at BP Plc’s Deepwater Horizon rig in the U.S. Gulf of Mexico triggered a record oil spill. Last month, the U.S. Justice Department sued BP, the owner of the rig, Transocean Ltd. and two other companies alleging they violated environmental laws.

BP has set aside $40 billion to pay for cleanup and litigation from the spill and is paying into a $20 billion escrow account to pay claims from individuals affected by the accident.

Photo:  An iceberg melts off Ammassalik Island in Eastern Greenland on July 19, 2007 . (AP file photo/John McConnico)