Cairn Energy, the Edinburgh oil and gas explorer, expects to start drilling its major prospect off Senegal later this year after getting the green light from government officials to start evaluation work.
The company has estimated that its fields there could contain more than a billion barrels of oil and initial work will get underway shortly with a 3D seismic survey.
The update came as the firm revealed first-half losses more than trebled to $230 million (£147m) after writing down the value of its stake in its former Indian subsidiary, which it cannot sell amid an ongoing tax dispute with the Indian government.
Cairn said it has now launched arbitration proceedings with the Indian government and is seeking restitution of the losses resulting from its inability to sell the stake.
The explorer’s residual shareholding in Cairn India was valued at $1 billion on 31 December 2013, just before the restriction was imposed. The value has since fallen to $526m.
“Cairn strongly contests the basis of the draft assessment order and has commenced international arbitration proceedings with the government of India under the UK-India Investment Treaty supported by detailed legal advice on the strength of the legal protections available to it under international law,” said the company yesterday.
The group also said it noted proposals recently announced by commodities giant Vedanta to merge with Cairn India. It said it will evaluate whether the move is in its interests of Cairn “in due course”.
Chief executive Simon Thomson said he was delighted to have agreement from the government of Senegal for an extensive evaluation plan on its two discoveries there.
“Our aim is to maximise the value of our Senegal asset within a balanced, well-funded company. Cairn is well placed to take advantage of this exciting opportunity as we build on the success of last year’s discoveries,” Thomson added.
The company’s Catcher and Kraken projects in the North Sea are on track for first oil in 2017.