CAIRN Energy’s decision to buy into acreage Azinor Catalyst has been working on East of Shetland provides a validation for the latter company’s decision to keep exploring in the North Sea amid tough times.
Azinor has continued with the kind of early stage activity that many firms decided it was probably safest to avoid as the crude price plunge caused havoc in the industry.
While Azinor suffered disappointment with the Partridge well in the Moray Firth in September, Cairn clearly thinks it may be on to something off Shetland.
Cairn is set to share the cost of drilling a well that will appraise a find made by Azinor in 2014 and a prospect it has worked up against a challenging backdrop.
The farm in deal agreed by the two firms may encourage other exploration-focused North Sea firms to keep at it in a way that could be good news for the industry.
Some small firms which don’t have producing assets rely on such stake sales to be able to continue working on prospects that others might ignore.
But small players have a vital role to play in maximising the potential of the North Sea with many big fish apparently reluctant to drill on anyything other than bumper prospects or targets close to their existing assets.
Industry leaders have made clear how concerned they are that exploration levels have fallen to record lows in the North Sea in the last two years.
The deal between Cairn and Azinor provides further evidence confidence is increasing in the North Sea, helped by the rise in the crude price since late 2016. This followed moves by major exporters to support the market.
Farm in deals were in short supply when times were harder.
News on Wednesday that Upland Resources had raised £3m from City investors as it prepares to drill the Wick well in the Moray Firth, suggested some financiers feel bullish enough to back explorers.
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