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Arctic Oil Discovery Could Spark Rush That 'Would Threaten The Fragile Environment' Greenpeace Warns

JAN M. OLSEN   08/24/10 11:41 AM ET   AP

Greenland

COPENHAGEN, Denmark — Scotland's Cairn Energy PLC said Tuesday it found gas off the west coast of Greenland, a discovery that environmental group Greenpeace warned could lead to a damaging rush for hydrocarbons in "vulnerable" Arctic waters.

As Cairn Chief Executive Bill Gammell said in a statement that the finding confirmed the company's "belief in the exploration potential," Greenpeace's ship Esperanza was circling the oil rig in protest to "confront dangerous deepwater oil drilling."

Greenpeace spokesman Ben Stewart said Cairn should have followed the example of oil companies that suspended deepwater drilling after the spill in the Gulf of Mexico.

"We're here to highlight and document the reckless push toward an Arctic oil run," Stewart told The Associated Press by telephone.

The organization was told by police onboard a Danish navy vessel not to violate a 1,650-feet (500-meter) security perimeter around the Stena Don rig, police said.

In a statement, Ove Karl Berthelsen, Greenland's minister in charge of mineral resources, said the drillings had been conducted with "very high safety and environmental standards and in accordance with the plans" approved by the authority.

The weather in the area had been good during the drilling and the icebergs that were in the vicinity had been towed away "without any major problems," Berthelsen said.

The Scottish company said the exploration was "at the very start," and that the well had not yet reached target depth, but didn't specify how much gas had been discovered.

Three decades after an exploration effort failed to find oil in the deep ocean off the west cost of Greenland, a semiautonomous Danish territory, drilling resumed there in 2001. Exploration so far has been unsuccessful.

Cairn started drilling 108 miles (175 kilometers) west of the Disko Island on July 1 in depths of 990-1,650 feet (300-500 meters). It said its wells have planned target depths of up to 13,860 feet (4,200 meters).

Last week, they were granted permission to drill two more deep-water exploration wells off Greenland.

Although seismic data indicate that the area could have gas and oil reserves, Cairn's finding doesn't necessarily mean that there are enough hydrocarbon reserves for "profitable" extraction, said Erling Halfdan Stenby, a chemistry professor at Denmark's Technical University.

Investors in Cairn were disappointed by the news, and sent shares down 4 percent to 445.30 pence in London.

"Some people had bought on the hope that Cairn would hit oil on the first well but they were disappointed. But that was unrealistic," said Peter Hitchens, an oil analyst with London-based Panmure Gordon.

"The discovery of gas actually shows that there is a potential for hydrocarbon system in the area so it starts to help them understand what is going on there which I think is encouraging," he said.

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Filed by Travis Donovan  |