CREATING WAVES: Protesters from Greenpeace near an oil rig in the Davis Strait off Greenland's west coast. Picture: Greenpeace
Cairn, which has drilled eight wells in the Arctic in the past two years, says exploration can be done safely and governments and their peoples have a right to exploit their natural resources .
But MPs on the Environmental Audit Committee want exploration halted until a beefed-up safety regime is imposed and an internationally recognised environmental sanctuary established.
Committee chairman Joan Walley MP said: "The oil companies should come clean and admit that dealing with an oil spill in the icy extremes of the Arctic would be exceptionally difficult.
"The infrastructure to mount a big clean-up operation is simply not in place and conventional oil-spill response techniques have not been proven to work in such severe conditions."
A 2008 study by the US Geological Survey found the area in the Arctic Circle may hold 90 billion barrels of oil and 1669 trillion cubic feet of natural gas.
Shrinking ice and technological advances have made Arctic resources more accessible. But high costs have led to limited development in the region.
Equipment problems this week forced Anglo-Dutch oil giant Shell to postpone its Arctic drilling programme. In July BP said it would not proceed with a $1.5 billion (£925 million) oil project in Alaska.
Cairn has so far drilled only dry wells in its exploration off Greenland. Despite having its headquarters and rigs invaded by protestors, it has said it is keen to try elsewhere from 2014.
But the environment committee cited a lack of conclusive evidence that current techniques to deal with other spills would work in Arctic conditions. It fears if there were an oil spill just before the winter, it might not be possible to cap the leak until the following summer.
The report said: "While we welcome that both Shell and Cairn have accepted they are responsible for cleaning up oil spills, at whatever cost, we are surprised that neither has put a financial estimate on the cost to their business of dealing with a 'worst case' oil spill.
"On one level that may be a matter for shareholders, but there does need to be public transparency to provide assurance that cost will not be a bar on dealing with the consequences of any spills being fully tackled."
A Cairn spokeswoman said: "Cairn believes that governments and their people have the right to explore for natural resources in their sovereign territory, with the potential to strengthen both their energy security and economy.
"The government of Greenland and its people are no different to any other part of the world. Cairn strongly believes that is possible to explore for energy resources both sustainably and safely in Greenland."
The group said there is already a robust regulatory regime operating in Greenland, where it has been operating since 2007.
The committee, whose members include Edinburgh North and Leith MP Mark Lazarowicz, wants drilling halted until a pan-Arctic oil spill response standard is in place; oil companies prove they can meet the costs of a clean-up; further research is conducted on oil spill response techniques in the Arctic; and the establishment of an environmental sanctuary.
Green Party MP Caroline Lucas, who is a member of the committee, said: "The UK government has a responsibility to respond to this report and to show vital leadership on the issue by doing all it can to urgently secure a moratorium on Arctic drilling – starting with companies registered in this country."
WWF Scotland director Richard Dixon said: "We believe Scottish companies like Cairn Energy should be leaders in clean energy instead of desperately seeking to wring out every last drop of oil no matter the risks. The Arctic can't afford the risk of oil spills and the planet can't afford the risk of burning the oil that lies in the Arctic."
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