CAIRN Energy has stressed it expects to win a $1.4bn (£1.1bn) claim against the Indian government as judgement day in its case approaches although booming North Sea oil receipts have made it less dependent on the outcome.
Edinburgh-based Cairn said an international tribunal is in the final stages of drafting a decision related to a tax case in India that the firm has been embroiled in since 2014.
Read more: Cairn Energy boss blames Indian government for redundancies
The Indian government is seeking $1.6bn tax from Cairn in a retrospective action it launched in connection with events dating from 2006.
However, Cairn insist it has paid all taxes due. It wants compensation from the Indian government for losses suffered since the action was launched.
“Cairn’s claim ... is for monetary compensation of ~US$1.4 billion, the sum required to reinstate the company to the position it would have been in, but for the actions of the Indian Income Tax Department since January 2014,” said the firm yesterday.
It added: “Cairn continues to have a high level of confidence in the merits of its claims in the arbitration.”
The tax dispute has been a costly distraction for Cairn, which entered the big league after making bumper finds in India under its founder Sir Bill Gammell.
Read more: Gammell - my sadness over India tax dispute
In 2015 his successor as chief executive, Simon Thomson, accused the Indian government of forcing Cairn to shed jobs and sell off assets to save cash because of the tax claim, which he said was spurious.
The company has been prevented from selling its remaining stake in former subsidiary Cairn India and successor businesses pending resolution of the dispute.
But Mr Thomson said yesterday: “Cairn enters 2019 with balance sheet strength and cash flow from North Sea production to fund significant growth opportunities.”
He has raised the prospect of Cairn making payouts to investors if it wins the Indian tax case.
The company is feeling the benefit of the decision it made to move back in to the North Sea under Mr Thomson’s strategy of balancing relatively low risk activity in the area with drilling in what are regarded as frontier regions.
Read more: Cairn makes £414m bid for Nautical Petroleum
In an update on operations in 2018, Mr Thomson said Cairn generated $395m sales revenue from two North Sea fields which it brought into production the preceding year with partners.
The company got an average $68 per barrel oil equivalent for the output from the Kraken heavy oil field off Shetland and the Catcher development east of Aberdeen.
Production costs averaged just $20/boe, reflecting scale economies and the use of modern production technology.
Cairn also highlighted its belief in the exploration potential of the North Sea.
The company is assessing the options for developing the Agar find which it made off Shetland with Faroe Petroleum and Azinor Catalyst last year. It noted the potential to bring further finds in the Catcher area into production, with projects in the running for approval this year.
Read more: Shetland discovery provides boost for oil and gas industry
Cairn expects to drill a well on the Chimera prospect in the UK North Sea this year and three in Norwegian waters.
It aims to start production from the Nova field in the Norwegian North Sea in 2021, with first oil from the giant SNE find made in Senegal in 2014 targeted for 2022.
The company will continue its exploration drive in relatively under-explored areas this year by drilling off Mexico and completing surveys off Suriname and Cote d’Ivoire. Cairn had $66m cash at the year end and $490m undrawn on a lending facility.
Shares in Cairn Energy closed up 3.2p at 188.3p. Vedanta bought a controlling stake in Cairn India for $5.4bn in 2011.
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