Difficult Times for Cairn Energy
Times are pretty turbulent for the Scottish oil and gas exploration company Cairn Energy. In the last week we have seen:
- strong rumours that they will be bought over by a company they set up (which have been neither denied nor confirmed)
- they announced losses of over $194m
- their operations in the Arctic are now of grave concern to both the UK and Greenland governments
Cairn has gone from making a loss of $1.19bn in 2011 to $194m in 2012. The loss has been significantly diminished because Cairn Energy sold its majority share in Cairn India – a company it set up. According to rumours reported from blogs to the Financial Times (albeit quite strong rumours) Cairn India is now doing well enough to buy its mother company! Another red flag for investors is the degrading of their stock rating – due to the company’s poor financial health.
To add further woes to the struggling company there has been a change of government in Greenland. The Siumut party has won favour in Greenland, partly due to its position on foreign polluting corporations taking advantage of its fossil fuel and mineral potential. Fears have grown among Greenland’s small population of 57,000 that their traditional values and way of life are being sidelined, and foreign corporations are getting preferential treatment as they splash the cash.
Although this has lead to a coalition government, it is likely that the new government will be much more stringent and ask for watertight measures in Cairn’s highly criticised spill plan. For Cairn Energy this comes at a particularly significant time. Although they have announced that they intend to drill for oil again in 2014, this is dependent on approval from the government in Greenland. Potentially it could be stipulate that Cairn Energy has two drilling wells on site – one for drilling, and a second to provide a relief well if a leak should spring. This would be a logical requirement as getting a second set of boring equipment to the Arctic at short notice will present complex logistical difficulties. It is also one of the main concerns levied at Cairn’s spill plan, and exemplified by the Deepwater Horizon spill.
But of course having such equipment on standby is expensive, and Cairn Energy can not afford to incur extra expenses. Their unsuccessful Arctic drilling in 2011 cost the company £1.2bn – and that was with one set of drilling equipment.
Utilising all of the fossil fuels we already know about would be enough to cause disastrous climate change, killing millions of the world’s poorest. Similarly it would be
the poorest inuit people of Greenland who would be worst affected by an oil spill in Greenland. The delicate ecosystem would be irrevocably damaged and their traditional ways of life would be severely threatened.
When we place this into the context of oil giants Shell and Total announcing that they will be pulling out of the Arctic, citing fear of financial and hugely consequential reputation damage, it would seem that Cairn should follow the ‘big boys’ example and pull out while they can.
Whether Cairn Energy causes the first major Arctic spill, doesn’t find oil OR hit the jackpot – each scenario spells disaster in some way, shape or form.
Cairn Energy need to do the only honourable thing and pull out of the Arctic.
#TellCairn to get out of the Arctic by taking our online action.