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Cairn joins Marathon in Cyprus exploration bid

BY ALEXIS FLYNN

LONDON -- Cairn Energy PLC said Thursday it has teamed up with Houston-based Marathon Oil Corp. to jointly bid for oil and gas exploration rights in Cyprus, where huge offshore discoveries of natural gas have reignited international tensions over the divided island.

Cairn and joint venture partner Marathon submitted bids May 11, with a decision by the Cyprus Ministry of Commerce Industry and Tourism expected later this year.

Recent discoveries of natural gas deposits in the waters off Cyprus and Israel have aroused interest in the eastern Mediterranean from the world' s leading energy firms, including Italian giant Eni SpA and French major Total SA. However, the prospect of hydrocarbon wealth has also served to enflame a long-standing dispute between the internationally recognized Republic of Cyprus and the Turkish-controlled Republic of Northern Cyprus.

"Cyprus offers early stage frontier exploration acreage with moderate technical risk," said Cairn in a statement.

Although Cairn has tended to concentrate on crude prospects in recent years, the Scottish firm has some gas pedigree. It sold off its interests in the Sangu gas field off the coast of Bangladesh to the Australian firm Santos Ltd. (STO.AU) in 2010 in part to fund a controversial exploration campaign in the Arctic waters of Greenland.

After spending $1.2 billion on the two-year drilling program, Cairn failed to locate commercial quantities of oil and gas offshore Greenland, though the firm has said it gained a wealth of geoseismic data that can be used for future campaigns. The company earlier this year sold a share in a block in the Baffin Bay basin to Norway' s Statoil AS (STO), with plans to renew exploration efforts in tandem with Statoil in 2014.

Despite political objections from Turkey, Cyprus earlier this year went ahead with its latest offshore licensing round, the island nation' s second offering to foreign firms following a 2007 tender.

U.S. firm Noble Energy Inc. (NBL) has since made five discoveries in the block it was awarded in the 2007 round, with total natural gas resources found by the firm so far estimated at 33 trillion cubic feet of natural gas.

The drilling for gas and oil in the seabed off Cyprus--which began last year--angered Turkey, which says it abuses northern Cypriots' rights to the same resources.

In April, Turkey launched its own exploratory drilling in the seabed offshore from the Turkish Republic of Northern Cyprus, drawing a sharp response from the government of Cyprus, which labeled the action as illegal.

Marathon and Cairn both control 40% each of the bidding consortium, which also includes junior partners CC Energy SAL and Oranje-Nassau Energie BV.

Cairn shares traded higher early Thursday. At 1107 GMT, Cairn shares were up five pence, or 1.6%, at 296p.

Dow Jones Newswires

05/17/2012

 

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