Cairn Energy: A success story 2015
Cairn Energy: A success story in 2015
It has been a difficult time for all involved in the oil industry throughout the last year. The decline of the oil price began in June 2014 and it has plummeted dramatically from $100+ USD per barrel to $47 USD as of this week (10/11/15). Subsurface Global grew steadily between 2008 – 2014 supporting many of the best National and International oil companies. During this period the demand for technical specialists was as high, and we worked hard to build and retain long term relationships developing a successful business. As we moved through the middle portion of 2014, we started to see demand for explorationists fall.
One of the companies who appear to be bucking the trend is Cairn Energy, a company who are based close by our head office in Edinburgh.
I am going to try and highlight why I think Cairn has been a success in such a tough period in the oil industry, what has been key to this success, our work with the company to support the technical teams and how 2014/5 has turned from a negative into a positive.
Cairn Energy were established in 1988 when it purchased Conoco’s UK onshore portfolio and was listed on the London Stock Exchange. From there, the company expanded quickly and moved into new regions such as Norway, South East Asia, New Zealand, India, Greenland and the Atlantic Margin. Cairn entered into India in 1994 with the Ravva field and this would prove key to the success of the company in the years to come.
A tax dispute between Cairn and Cairn India which began in 2006 threatened to put a dark cloud over the company. At this time, Cairn had restructured its Indian side of the business in preparation to float it on the Stock Exchange the following year (2007). They were then bought over by Vedanta Resources who acquired a majority portion of Cairn India in 2011 for $6.5bn. Cairn had been very successful in India, largely in part to their discovery in the desert state of Rajasthan but in 2014 the company was given a tax bill of $1.6bn plus interest and penalties and this threatened to cause a decline for the company and forced them to act by selling a 10% stake in the Catcher field in the UK North Sea for $182 million in September 2014. The dispute also forced a restructure of the company, which led to approximately 90 employees, (around 40% of the workforce) losing their jobs. This appeared to leave the company in a state of flux but things were soon to change, and for the better with the company enjoying success working offshore Senegal.
Cairn’s work in Senegal began in 2013, where it farmed into three contiguous blocks offshore – Rufisque, Sangomar and Sangomar and one year later a significant oil discovery was made, reckoned to be one of the biggest oil discoveries anywhere in the world in 2014. Oil was found in the FAN 1 Exploration Well, on the Sangomar block. A second oil discovery was then made a short time later in the SNE-1 well, which is around 100 kilometres offshore again in the Sangomar block. This was a more than welcome result for Cairn, given the turbulent year the company had until that point, with the India tax issue and the resulting redundancies.
I believe that not only Cairn was in need of this discovery, but the wider oil industry as a whole may have benefited from the resulting lift in morale. It gave “Exploration Companies” hope that big finds are still out there and that persistence and courage in your convictions, can lead to “black gold”.
With the cloud beginning to lift, Cairn were in a position where they needed additional technical support. Subsurface Global were engaged to help Cairn reinforce their subsurface teams. We have been working with Cairn since 2012 on a number of projects providing them with our best available consultants. We work closely with the technical management, contracts and finance personnel to match their needs and have been successful in attracting some of the best Engineers and Geoscientists to Edinburgh. The lure of working on one of the most exciting projects in the oil industry has proved a great incentive for consultants to consider Scotland’s capital.
n conclusion, given the current state of the oil industry and how uncertain times are, it is very difficult to predict where Cairn will go from here. The first appraisal well has been spudded in offshore Senegal and much will be expected of the drilling campaign and how these discoveries are brought on stream in the years to come. In a recent quote from Cairn’s CEO Simon Thomson, he outlined his thoughts on how the company can look to progress:
“We can now look forward with strength – our development expenses are covered, our exploration expenses are covered and we indeed are looking at a fairly expansive exploration programme in Senegal, with three firm and three optional wells. “We’re in a good position to take advantage of lower costs, as rig and services costs have declined markedly, so it’s a good time to be going out and exploring.”
The industry will wait to see the outcome and how Cairn manages this project, its development and how they build on the success of 2015. We will work hard to maintain our strong working relationship with Cairn and look forward to more exciting projects.
If you are interested in consulting with Subsurface Global please keep regularly checking our jobs page or get in contact directly at email@example.com.
Share this article