BARCLAYS Capital has cut its target price for Cairn Energy by more than 10 per cent after the oil gas firm hit fresh complications in India.

The investment bank has reduced its valuation for shares in Edinburgh-based Cairn to 240p from 270p noting the Indian government has received $104 million dividends due to the company from its former subsidiary in India.

The government has prevented Cairn from selling its remaining stake in the Indian business pending resolution of a tax dispute that started in 2014.

The dispute will be considered by an arbitration panel in January. Cairn’s chief executive Simon Thomson has said it has paid all taxes due. The firm is confident it will win the case.

Barclays said its base case remains that the arbitration finds in Cairn’s favour. However, the government’s latest action suggests that enforcement of a tribunal decision in Cairn’s favour could take time.

It said the tax dispute has created material uncertainty around Cairn’s net asset value. Cairn could face a $1.5bn charge plus interest and costs if it lost.

India’s Business Standard reported that the government may try to sell Cairn’s 9.8 per cent stake in Cairn India.

Cairn shares closed down 2.5p at 170p yesterday. The bank retained an overweight rating for shares in Cairn, whcih has mde big finds off Senegal.

Cairn made no comment yesterday.

Barclays is enthusiastic about the long-term potential of Cairn’s portfolio. The company has made big finds off Senegal.

The bank also said the share price of Aberdeen’s Faroe Petroleum did not reflect the progress the company has made off Norway.

It noted the outlook for the European exploration and production sector had become increasingly challenged after the crude price came under renewed pressure following growth in production from US shale areas.

Barclays has cut its forecast for the price of Brent crude this year to $52 per barrel, from $56/bbl. The 2018 forecast has been cut to $57/bbl from $67/bbl.