Scottish oil giant Cairn quits Bangladesh

Published on Thursday 4 November 2010 14:00

CAIRN Energy yesterday announced its final withdrawal from Bangladesh - the country where discoveries in the 1990s helped its transformation into one of the UK's biggest companies - as the Edinburgh group continues its search for black gold in Greenland.

• Sir Bill Gammell's Cairn Group has been in Bangladesh since the 1990s

The move, after 16 years in the south Asia country, comes ahead of the Scots group's planned 5 billion sale of its Indian interests and renewed drilling in Greenland early next year.

Cairn's announcement came during a day of major developments for Scotland's oil and gas industry, with Aberdeen-based firms PSN and Wood Group announcing hundreds of millions of pounds of contracts and Edinburgh-based Melrose Resources reporting the start of natural gas production from two fields in Bulgaria.

Cairn said its exploration subsidiary Capricorn had struck an agreement with its partner in the area, Australian firm Santos International, for it to acquire Cairn's 37.5 per cent interest in the Sangu gas field and its 50 per cent interest in an exploration block in the area for an undisclosed sum.

Simon Thomson, the Edinburgh group's commercial and legal director, said the company felt it was "an appropriate time" for the move and that it was proud of its achievements in the country.

"Cairn has been a strong supporter of international investment in Bangladesh and with its partners has invested more than 600 million there helping provide energy security for the country and its people," he said.

Cairn had discovered the Sangu gas field in the Bay of Bengal in the 1990s with the first gas produced in 1996. With a number of other major discoveries under its belt since, the group has seen its market value rise by more than 20-fold to over 5.4 billion. It later sold half of its Bangladeshi interests to Shell as part of a deal which gave Cairn a stake in Shell's interests in Rajasthan, India.

The drilling project in Greenland has been the subject of significant market speculation in recent months. Although an update last month disappointed investors with news that it had abandoned two of its three exploration wells at the end of the Arctic exploration season, the company has stressed that the project is at an early stage. Shares in Cairn closed up 6p at 387p.

Meanwhile, oil services heavyweight PSN said it had been awarded a 300m-plus five-year contract by Shell UK. Under the deal, PSN will provide engineering and maintenance services to Shell's North Sea platforms.

Wood Group also announced it had been re-awarded an operations and maintenance contract with offshore operator Hess in the North Sea for three years. The contract is estimated to be worth up to 50m a year.

And Melrose Resources said it had started natural gas production from two fields in Bulgaria, with the government there estimating they could meet about 15 per cent of the country's annual gas needs.Most of the gas from the fields will be sold to Bulgaria's state-owned gas utility company Bulgargaz, with the remainder going to a local industrial user. Melrose said the agreed price for the gas is ahead of previous guidance.

The news came just days after shares in the company fell sharply following an announcement by Canadian-based Sterling Resources that it had ended an agreement for the company to take a stake in two exploration sites off the coast of Romania. Shares in Melrose closed up 7p at 270p while Wood Group gained 10p to 462p.