Cairn Energy (
www.cairnenergy.com) is looking to receive $600 million (£425 million) in damages from the Indian Government.
The Edinburgh-based company has begun formal arbitration proceedings to get compensation for the sharp drop in the value of its stake in Cairn India since the Indian government launched a massive tax claim against it two years ago.
The government has prevented Cairn Energy selling its remaining 10% stake in the business before the dispute is resolved, and its value has fallen from $1 billion to $400 million. Cairn insists that all tax due has been paid.
Cairn chief executive Simon Thomson (pictured) says that the company has been forced to cut around 40% of its workforce and to sell North Sea assets to conserve cash while the dispute continues.
Analysts say that the start of arbitration proceedings is a step in the right direction, but they add: “Do not assume that Cairn will get any value for its Indian investment.”
In an update on recent trading, Mr Thomson said that Cairn has enough resources in place to fund its planned programme of exploration and development activity. It plans to spend around $500 million in the coming months finishing work on the giant Kraken and Catcher fields in the North Sea, which should come on-stream in 2017.
It said that work on the Kraken heavy oil field East of Shetland is progressing well; it is also pleased with the progress it has achieved off the coast Senegal (the company made two finds there in 2014, which analysts have said look encouraging).