Arctic Exploration – Lessons from Cairn Energy's drilling in ... - NPF

Cairn Energy PLC Arctic Exploration – Lessons from Cairn Energy’s drilling in Greenland June 2012

Disclaimer These materials contain forward-looking statements regarding Cairn, our corporate plans, future financial condition, future results of operations, future business plans and strategies. All such forward-looking statements are based on our management's assumptions and beliefs in the light of information available to them at this time. These forward-looking statements are, by their nature, subject to significant risks and uncertainties and actual results, performance and achievements may be materially different from those expressed in such statements. Factors that may cause actual results, performance or achievements to differ from expectations include, but are not limited to, regulatory changes, future levels of industry product supply, demand and pricing, weather and weather related impacts, wars and acts of terrorism, development and use of technology, acts of competitors and other changes to business conditions. Cairn undertakes no obligation to revise any such forward-looking statements to reflect any changes in Cairn's expectations with regard thereto or any change in circumstances or events after the date hereof.

Arctic Exploration – Lessons from Cairn Energy’s drilling in Greenland, June 2012

Discovering hidden value through entrepreneurial exploration

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Arctic Exploration Lessons from Cairn Energy’s drilling in Greenland  Introducing Cairn Energy PLC  Cairn in Greenland  An Operator’s Perspective     

3D Seismic Acquisition Logistical Support Stakeholder Engagement Ice Management Local Impact Benefit

 Conclusions



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Introducing Cairn Energy 4



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Vision

“La


Clairvoyance” Rene Magritte


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Strategic Overview “To become the exploration company of choice, for Investors and Governments, by offering to explore for transformational potential in a rapid and safe manner within a well balanced exploration and production portfolio.”

Strategic Objectives:

 Create value and opportunities through exploration led growth  Exposure to transformational exploration potential in frontier basins  Utilise Cairn's full cycle capabilities to deliver value from a well balanced exploration and production portfolio of assets  Strong balance sheet from which to allocate capital to growth opportunities Arctic Exploration – Lessons from Cairn Energy’s drilling in Greenland, June 2012


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Corporate Profile and Strategic Focus Corporate Area of current focus

 

London listed since 1988 FTSE 250 company with asset investment on Indian exchanges

Early entry positions  

Bangladesh, India and Nepal Greenland

Focus on materiality   


Geological potential Commercial terms Operational and financial flexibility


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Cairn Focus on a Balanced Portfolio Cash, shareholding, developments, producing properties and cash flow

Near Term Exploration

Frontier basins

Open Acreage

e.g. Skarfjell e.g. Producing

Asset Appraisal e.g. Tybalt

Cash

Development e.g. Catcher

Agora

~22% Cairn India Ltd Shareholding

Low risk but with inherent organic growth potential


Spanish Cyprus Applications Applications Valencia Basin 5 Blocks, Spain South Greenland

Greenland Portfolio Pitu

Higher risk transformational exploration potential


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Cairn & Agora  Important, first step towards expanding and re-balancing Cairn’s portfolio  Adding lower risk, near term exploration, appraisal and development assets  Platform to build material business unit in UK and Norwegian North Seas  Qualification for future Norwegian licence applications  Acquisition complements Cairn’s other strategic assets, including transformational exploration potential in Greenland and prospective acreage being considered in Eastern Mediterranean  Agora team retained by Cairn – track record and proven ability to create and identify new play concepts and prospects in the region



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Agora drilling programme (May-December 2012)

Discovering hidden value through entrepreneurial exploration10

Skarfjell Oil Discovery – April 2012 

Skarfjell-1 found high quality upper Jurassic reservoir sandstones containing light oil over a 168m gross interval (net pay 53m).



No fluid contact was observed – a down dip appraisal well is required to establish the field oil column height (planned for 2013).



Due to rig schedule commitments the well was not tested but extensive data acquisition and sampling was carried out.



Estimated preliminary resource of 60 - 160 mmbbls recoverable oil.



The discovery is likely to be commercial, and a new 3D seismic acquisition over the discovery already underway.



The discovery well is located 17km south west of the Gjøa Field.

Titan

GjØa

Skarfjell

Grosbeak

Norway

Stavanger



The well TD is 2,976m and the water depth at the location is 368m.



The PL418 licence group comprises:

Wintershall Norge ASA (45%, Op.), Bayerngas Norge AS (20%), Agora (20%) and Edison International Norway Branch (15%) UK

Investor Presentation, April 2012


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Cairn in Greenland 12



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Greenland Key Highlights  Leading acreage position ~ 1/3rd UK North Sea (equivalent to 15 quadrants or 450 blocks)

North East Bid Rounds 3 and 4

 Round 1 entry (2007) with Exxon, Chevron and Husky  Round 2 entry (2010) with Shell, Conoco, Maersk, Gdf and Statoil  Cairn has drilled 8 of the 14 industry exploration wells

Round 2 THULE

Greenland

Melville Basin Baffin Bay

UPERNAVIK

 Extensive knowledge, database and operating capability:    

2D seismic ~85,000km 2 x 1,500km2 3D seismic surveys 8 wells Geochemical, gravity and magnetic data

Round 1

West Disko Blocks

ILULISSAT AASIAAT

Kangerlussuaq

 2012 - Farm out of 30.625% interest in Pitu block to Statoil ASA  Industry partner(s) required to fund forward exploration programme First phase exploration completed Selective investment exploration phase yet to commence


West Greenland

Open Round NUUK

Southern Greenland


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West Greenland Exploration History

• while benefitting from previous 30 years exploration and data acquisition

100,00

OIL PRICE 2009 US$/BBL CUMULATIVE EXPLORATION WELLS UNIT CUMULATIVE SEISMIC KM CUMULATIVE LICENSED ACREAGE KM2

250000

Y2006 Bid Round 200000

80,00 150000

Discovery of Disko Island oil seeps

60,00

100000 40,00

Quelleq-1 well

Kangamuit-1 well

50000

20,00

0

0,00

YEAR


CUMULATIVE SEISMIC (KM) CUMULATIVE LICENSED ACREAGE (KM2)

• using first mover advantage to build large acreage position

120,00

OIL PRICE (2009 US$/BBL) CUMULATIVE NO. EXPLORATION WELLS

Cairn entered Greenland at start of new exploration phase

Cairn Greenland entry


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Greenland First Phase - Exploration Drilling Napariaq

Pre-Tertiary Volcanics Target Wells 2011 2010

Sigguk

Tertiary Target Wells 2010 2011

Ingoraq

Chevron, DONG, Exxon, Nunaoil

Eqqua Husky, Nunaoil

West Disko

Exxon, Husky, Nunaoil

ILULISSAT

AASIAAT

Greenland Husky, PA Nunaoil Resources, Nunaoil

 3 Tertiary targets  2 Mesozoic / pre-volcanic targets

 

Biogenic and thermogenic gas found in T8-1 3 oil types found in Alpha-1  One oil type is pre-tertiary in age

Kangerlussuaq

3 wells 2011 Atammik

Greenland

West Disko  5 Exploration wells in the Disko area 2010 – 2011

NUUK

West Greenland Lady Franklin


West Greenland  Cairn acquired 100% working interest January 2011  3 exploration wells drilled 2011  Source and reservoir rocks encountered  Oil and gas shows Discovering hidden value through entrepreneurial exploration

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Greenland Second Phase - Pitu Focus (Baffin Bay Melville Basin) THULE

Greenland

Melville Basin



Pitu awarded and contract signed Jan 2011



8,170 km2 (36 UK blocks or 1.2 quadrants) ~20% covered by 3D seismic



Cairn acquired 3D seismic and cored boreholes in 2011



3D seismic results H1 2012



Basin + block multi-billion barrel potential

Industry Co-operation

UPERNAVIK


Shell operated consortium (8 companies including Cairn) to drill up to 10 stratigraphic cored boreholes in Baffin Bay ~800m depth Aug to Oct 2012 using drillship with mobile laboratory. To de-risk prospects for source, reservoir, seal and calibrate seismic prior to drilling


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Pitu – Play Summary and Forward Strategy Greenland

THULE

Schematic play section

Melville Basin

UPERNAVIK

Forward strategy  

Initial prospect inventory Q3 2012 Exploration drilling


 

Cairn to operate exploration / appraisal activity Statoil to operate development activity


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Greenland Disko, West and South West Disko

Kangerlussuaq

Chevron, DONG, Exxon, Nunaoil

Husky, Nunaoil

Exxon, Husky, Nunaoil

Husky, PA Nunaoil Resources, Nunaoil

QAQORTOQ ILULISSAT

AASIAAT

West Greenland

Kangerlussuaq

NUUK

Southern Greenland

Forward strategy  All commitments fulfilled  Industry partner(s) required to fund forward exploration programme  Tertiary targets require 3D Seismic  Mesozoic targets in Disko area require a technological breakthrough or well data from adjacent blocks to identify the base volcanics Evaluation continues, no significant near term exploration / activity expenditure expected until industry partner and / or major commercial success in Pitu Arctic Exploration – Lessons from Cairn Energy’s drilling in Greenland, June 2012


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An Operator’s Perspective 19



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Cairn’s Approach to Corporate Responsibility Offshore Greenland Cairn has an absolute focus on safety Our Greenland exploration campaigns included: 

Two rigs



Comprehensive oil spill response plan



Team with more than 1,000 years of harsh environment drilling experience



Full testing of the blow out preventer equipment, including mechanical testing by independent authorities, prior to and during operations



Drilling schedules designed to ensure that only one rig will enter a hydrocarbon-bearing section at any given time



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3D Seismic Acquisition Arctic Exploration – Lessons from Cairn Energy’s drilling in Greenland, June 2012


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3D Seismic Operations Pitu and South Greenland




Ramform 3D Vessel and support vessels



1.2 x 8 km array



Most northerly 3D survey



Utilising European and Russian GPS



Processing and interpretation ongoing


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Pitu and Baffin Basin Play Types Rotated Fault Blocks

Palaeozoic Carbonates ?

Rotated Fault Blocks

Axial and Lateral Fan Systems Greenland



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Pitu Geochemistry and Play Types 

Oil Shows

42 Geochemical analyses of 48 cored boreholes (Cairn proprietary data 2011) confirms presence of micro oil and gas seeps conformable with 2D closures

Very Strong

Greenland

Strong Fair Background

Flank Fan Systems

Initial processed 3D timeslice over anomaly associated with oil seeps



Rotated Fault Blocks and Palaeozoic Carbonates?

Axial Fan Systems

3D mapping integrated with geochemistry Q3 2012



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Logistical Support Arctic Exploration – Lessons from Cairn Energy’s drilling in Greenland, June 2012


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The Logistics Challenge in Greenland

GREENLAND



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2011 Operations Overview ILULISSAT Helicopter base

Ocean Rig Corcovado

Leiv Eiriksson

KANGERLUSSUAQ Personnel Transfer AASIAAT Supply base and Project Office

Charter flight from Edinburgh NUUK Country Office, Project Office, Supply Base and Helicopter Base

Cougar S-92


Ice Management


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Emergency Planning - Oil Spill Response 

Tier I On Site Equipment (In Country Equipment)



Tier II Arrangements (In Country Equipment)



Tier III Arrangements – Oil Spill Tier III Contractor OSRL 

IMO Level II / Level III trained emergency response personnel



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Stakeholder Engagement Arctic Exploration – Lessons from Cairn Energy’s drilling in Greenland, June 2012


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Greenland Prime Minister Offshore Visit July 2010

Greenland Prime Minister, Industry Minister and Head of BMP with Cairn staff visit Stena Forth

Greenland Prime Minister and Industry Minister on bridge of Stena Forth

“We need a stronger economy and we have to utilise the opportunities that oil could bring to us” Kuupik Kleist, Greenland’s Prime Minister National Geographic, June 2010 Arctic Exploration – Lessons from Cairn Energy’s drilling in Greenland, June 2012


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Engaging With Stakeholders           

Central authorities (Ministries and BMP) Municipality administration Town and settlement administration Hospitals and health authorities Police, Fire Brigade Harbour- and airport administration KNAPK (Kalallit Nunaanni Aalisartut Piniartullu Katuffiata ) Employers’ associations and Labour Union Local trade councils Key employers / companies NGO’s



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Ice Management Arctic Exploration – Lessons from Cairn Energy’s drilling in Greenland, June 2012


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Ice Management Plan 





World recognised ice specialist C-Core contracted study historical data on sea ice, frequency and size of icebergs to provide predictions for use in designing Ice Management Plan Robust Ice Management Monitoring system established, utilising dedicated crews with 30 yrs experience in similar climates

T4-1

T8-1

Alpha1S1

Detection and measurement  



Radarsat image, May 31 2010

Marine / Satellite / HF Radar Aerial and vessel reconnaissance

Physical intervention 

Towing, water cannon



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Local Impact Benefit Arctic Exploration – Lessons from Cairn Energy’s drilling in Greenland, June 2012


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Impact Benefit Agreement Areas:  Employment practices  Human resources development  Business development  Social well-being  Cultural well-being Two funds, administered through a local authority partnership. Recent awards include:  Education Fund    



Helicopter instrument flying course Interactive oil and gas education installation/montage Course development at Arctic Technology Centre Executive negotiation course for Arbejdsgiverforening

Community Development Fund  

Schools sports equipment Provision of sports coaches



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Possibilities for Local Goods and Services 

Exploration phase usually seasonal (summer)



Seismic- and drilling vessels largely selfcontained



Oil Industry requires specialist contractors, goods and services 



Rigid specifications: technical requirements, quality, safety and environmental protection Commercially viable



During exploration phase, no guarantee of a future market



Better possibilities for local goods and services in case of development / production Promoting participation within the framework of our HSEQ requirements





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Conclusion Arctic Exploration – Lessons from Cairn Energy’s drilling in Greenland, June 2012


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Vision

“La


Clairvoyance” Rene Magritte


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Cairn in Greenland Largest Acreage Holder and Most Active Operator  Four seasons of responsible, safe and efficient operations 2008 – 2011  Catalyst for heightened industry interest offshore Greenland  Evaluating an extensive geological data base (8 wells, 85,000 km 2D, 2 x 3D seismic)  Seeking partners (such as Statoil recently) to fund future activity

Melville Basin

GREENLAND West Disko Blocks West Greenland

Southern Greenland

 USGS places Greenland in the top ten “yet to find” hydrocarbon destinations of the world Arctic Exploration – Lessons from Cairn Energy’s drilling in Greenland, June 2012


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Exploring Greenland Lessons learnt  First phase of exploration completed  Hydrocarbon systems present, no significant volumes yet encountered  Basins remain attractive and hugely underexplored  Principal sub-surface risks change from basin to basin  Predicting volcanic thicknesses continues to be a challenge in some areas

North East Bid Rounds 3 and 4 Round 2 THULE

Greenland

Melville Basin Baffin Bay

 Drilling and seismic operations can be carried out safely  Key challenges are in logistics, metocean conditions  Keys to success in having an experienced and high quality team, meticulous planning, early engagement with stakeholders and a supportive government and people  Second phase will need partners  3D seismic to optimise risk assessment  Technical strength  Financial strength  Shared vision of exploration potential Arctic Exploration – Lessons from Cairn Energy’s drilling in Greenland, June 2012

UPERNAVIK

Round 1

West Disko Blocks

ILULISSAT AASIAAT

Kangerlussuaq

West Greenland

Open Round NUUK

Southern Greenland


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Greenland Future Development Concepts

Photo: Eiliv Leren, Statoil

Snøhvit LNG Gas terminal at Melkøya, Norway


Newfoundland Labrador Department of Natural Resources Petroleum Development - Annual Activity Report 2009

Terra Nova Oil Field Schematic, Grand Banks


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Investor Relations Contacts David Nisbet  Group Corporate Affairs

Carly Blackbourn  Investor Relations Coordinator





E-mail: [email protected] Tel: +44 (0)7711 146 068

E-mail: [email protected] Tel: +44 (0)131 475 3094

www.cairnenergy.com Arctic Exploration – Lessons from Cairn Energy’s drilling in Greenland, June 2012


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