Petronas, Cairn sign deal for Greenland oil blocks

By Kamarul YunusPublished: 2009/10/16

State-owned energy giant Petroliam Nasional Bhd (Petronas) is investing US$310 million (RM1 billion) to look for oil offshore Greenland and raise its share in an Indian venture.

It is buying a 10 per cent stake in six oil blocks operated by the UK's Cairn Energy plc.

Its subsidiary Petronas International Corp Ltd (PICL) signed a binding heads of agreement with Cairn last Wednesday.

PICL will buy Cairn's six blocks for US$70 million (RM235 million). It also has an option to double its stake to 20 per cent and payment for the additional interest will be based on the market value then.

They also agreed to bid together for future projects with Cairns holding 80 per cent interest and Petronas the rest.

The agreement also gives Petronas an additional 2.3 per cent in Cairn's unit in India, Cairn India Ltd (CIL), taking its holding to 14.94 per cent.

Petronas will pay US$240 million (RM804 million) for the CIL shares.

In a statement, Cairn said it will use funds from the sale for its exploration activities.

"The acquisition of additional CIL shares by Petronas reflects Cairns' shared belief in the continuing growth potential of Rajasthan in India while giving the company increased financial and operational flexibility in line with its growing confidence in Greenland," Cairn chief executive officer Sir Bill Gummell said.

Cairn is an Edinburgh, Scotland-based oil and gas exploration and production company listed on the London Stock Exchange, while CIL is listed on the Bombay Stock Exchange and the National Stock Exchange of India.

Cairn, through its subsidiary Capricorn Oil Ltd, operates six blocks in Greenland. It also has non-operated interests in two other blocks. It is now focused on South Asia, which has already resulted in a significant number of oil and gas discoveries.