Campaigners fear Scots firm's gas find is a threat to nature

• A Greenpeace zodiac passes the Sten Don Cairn Energy oil rig off the coast of Greenland where the Scottish firm has found gas which could point way to future oil discoveries Picture: Greenpeace

Cairn Energy, the Edinburgh-based oil and gas explorer, has announced it has discovered gas in thin sands in the region - about 60 miles off Disko Island in west Greenland.

The find, which indicates potential for future discoveries of oil, has enraged campaigners who believe a disaster of the scale of the Gulf of Mexico spill earlier this year could wipe out native birds and animal species in the region, which is home to species including polar bears, blue whales and 90 per cent of the world's narwhal population, as well as a large number of seals, sharks, cormorants and kittiwakes.

But energy experts have praised Cairn's discovery as "transformational" for the company, saying the potential discoveries could generate hundreds of billions of dollars for Cairn - and jobs in the Scottish oil and gas industry.

Speaking to The Scotsman, Cairn's chief executive Bill Gammell said the company was optimistic of an oil discovery, but warned that it was early days. "When we first found something in India, it was not seen as significant," he said. "With this location, we're at the start of a marathon. We are encouraged, but it is too early to say what the significance will be - it has always been about taking a long- term view."

Mr Gammell said last week that a sale of a significant stake in the company's Indian arm - which operates the Rajasthan oil fields - to mining giant Vedanta Resources would allow the company to focus on further explorations in Greenland.

The company, a relatively small player in the global oil market, is the first to make explorations off Greenland's shores - a path which is likely to be followed by bigger companies such as Exxon Mobil and Chevron, the US's two biggest oil firms by market value, which have already snapped up offshore licences in Greenland in the hope of discovering a major new oil producing basin.

The firm's Edinburgh headquarters were this week the target for "Climate Camp" campaigners protesting against Royal Bank of Scotland's investments in oil exploration.

Greenpeace, which is monitoring Cairn's activities from its Esperanza ship, warned it did not believe a company the size of Cairn - ten times smaller than industry giant BP by market cap - could financially cope with the impact of cleaning up any oil spill. The remote location of the site could also cause difficulty for a clean up operation.

"This is obviously a major step forward for Cairn Energy in terms of finding potential oil basins in an area they have never been before," said Ben Ayliffe, senior energy solutions campaigner at Greenpeace. "But it is two steps back in the fight against global climate change and protecting fragile environment in places like the Arctic.

"The area is home to a lot of fragile species and in the case of a spill, oil doesn't disappear quickly in cold areas, as it does in warmer parts of the world. The longer Cairn - or any other oil company - is involved in getting oil from the remote parts of the world, the greater the chance of tragedy."

It is likely that if Cairn Energy did find a significant oil production source in Greenland, it would take on a partner - potentially one of the major oil companies such as Exxon Mobil or Shell - to carry out production in the region, known as "Iceberg Alley" due to the large number of icebergs and tough conditions which have previously deterred other oil companies.

"The Arctic is a particularly sensitive environment," said Richard Dixon, director of WWF Scotland. "It is not like the Gulf. In the Arctic, it would be very difficult to reach any source of a spill."

Experts have claimed that Cairn could see its share price double to about 8 if it is successful in drilling for oil in the region. Peter Hitchens, analyst at Panmure Gordon, said the area could yield billions of barrels of oil for Cairn. "This really could be transformational for them - again," he said. "It is potentially huge - and reminiscent of the North Sea back in the 1960s.

"It could mean a great deal for Scotland - especially as there is no history of oil industry in Greenland and only around 50,000 people. They will have to look elsewhere - and the most obvious location would be Scotland - for that kind of expertise."

But Friends of the Earth Scotland warned that the sale would "make a mockery" of Cairn's ethical mission statements.

"By seeing the melting of sea ice as an opportunity, Cairn is not making the connection between their activities drilling for oil and the climate change that is causing the melting sea ice," said Juliet Swann, head of projects and campaigns at FoE Scotland.

"Selling off holdings in Cairn India to fund oil exploration in an area that is witnessing some of the worst effects of climate change is like robbing both Peter and Paul to pay to wreck the local and global environment."

A spokesman for Cairn Energy said: "Cairn is operating offshore Greenland at the invitation of the Greenlandic government which believes that oil and gas exploration offers potential opportunities for Greenland's economic and social development.

"The Greenlandic government has established some of the most stringent regulations globally. Cairn has worked with these regulators throughout the last three years to minimise the risks associated with its conventional drilling campaign, putting procedures in place which place the highest possible priority on safety and environmental protection."

Isolated world of snow and ice:

ALTHOUGH there is evidence of humans in Greenland as far back as 2500BC, it was unknown to Europeans until the tenth Century when Icelandic Vikings settled on the south-western coast.

Erik the Red, who had been exiled from Iceland after committing murder, sailed to Greenland, where he explored the coastline and claimed certain lands as his own.

Despite the harsh conditions - 80 per cent of the island is covered by ice - the Icelandics lasted for 500 years before disappearing. During this time, at around AD1200, the ancestors of the modern Inuit Greenlanders arrived from the north-west.

They were the only inhabitants for centuries until joint expeditions by Norway and Denmark in the 18th century.

During the Second World War, Greenland was once again largely forgotten and became detached, socially and economically, from Europe. After the war, control was taken up by Denmark, and in 1953 its colonial status was turned into that of an overseas county.

Today, Greenland remains part of the Kingdom of Denmark, although it has enjoyed home rule since 1979.