New Malta oil explorers reeling from Greenland failure

The parent company of Capricorn Malta, which has been granted an oil exploration concession in Malta, had come under criticism by environmental campaigners for its work off Greenland, where the company has drilled eight wells without making a commercial find.

Cairn Energy is to ramp up the hunt for oil and gas after being awarded three exploration blocks off Malta.

The move follows the end of 2011's $600 million drilling programme off Greenland after the biggest exploration campaign attempted in the Arctic island's waters failed to make a viable discovery.

Cairn's eight-well programme, spread over two years, was one of the industry's most advanced efforts to find oil in Arctic waters and drew protests from activists who said it risked damaging a pristine environment.

The granting of the awards could stoke controversy about Cairn Energy's activity in areas of environmental sensitivity.

About 20 Greenpeace activists were arrested in July after storming Cairn's Edinburgh office dressed as polar bears. In August, Greenland's government said it will publish the company's contingency plan for an oil spill. "However the company tries to spin this, Cairn's Greenland misadventures have been an unmitigated disaster from day one," Greenpeace said in a statement. "The incredible technical, economic and environmental risks of operating in the Arctic simply aren't worth it."

Cairn has been criticised by environmental campaigners for its work off Greenland, where the company has drilled eight wells without making a commercial find. However, Cairn said it strongly believes it is possible to explore for energy resources both sustainably and safely in Greenland.

A spokesman for the company was quoted by the Glasgow Herald saying: "Cairn has a successful track record in frontier exploration and has demonstrated the ability to develop and manage complex exploration and drilling projects successfully, whilst minimising its impact on local communities and the environment."

The company is in the early stages of exploring in Spanish waters in the western Mediterranean, where it was awarded five blocks last year.

The move into Malta forms part of a plan to build a balanced portfolio of assets developed by Simon Thomson since succeeding Sir Bill Gammell as chief executive in July last year.

In August, Cairn bought stakes in three deep water blocks off Morrocco. It has bid for licences off Cyprus and is considering applying for acreage off Lebanon.

The Mediterranean has had attention from big names. In August Genel Energy, run by former BP chief executive Tony Haywood, acquired interests in blocks off southern Malta from Mediterranean Oil & Gas.

America's Noble Energy has made some big finds in the Eastern Mediterranean in recent years.

Cairn Energy made a low key announcement about the Maltese awards, in which it confirmed the company entered into an Exploration Study Agreement on December 7 with the government of Malta.

The agreement covers the kind of early stage work that oil and gas companies would complete with a view to identifying areas in which it might be worth drilling.

Cairn said: "The ESA covers an initial two-year period with geological studies, reprocessing of existing and acquisition of new 2D seismic data and limited capital works, with the right to negotiate a production sharing contract on an exclusive basis thereafter.

"The agreement can be extended to a third year in order to acquire 3D seismic."

The Maltese government said the work programme consists mainly of the reprocessing of existing 2D seismic data and the acquisition and processing of a minimum of 1500km of new 2D seismic.

It also includes mapping of key horizons over the area covered by the available data. It said Cairn would pay a signature bonus of $100,000 and spend at least $2.5m on exploration within the term of the agreement.