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Daily Telegraph: After Shell, experts have Cairn over a barrel: “Watching the lawyers circling over Shell, the Cairn directors probably think that whatever DeGolyer charges, they've got a bargain.” (ShellNews.net)

 

19 August 04

 

Consultants check Cairn oil reserves

 

It's unlikely that DeGolyer and MacNaughton will discover anything very surprising when they pick over the records at Cairn Energy, the luckiest oil company of 2004. That's not really why the firm ("Knowledge, Integrity, Service", says its website pompously) has been brought in.

 

Cairn found oil in such quantities in Rajasthan that its interest in a single block has propelled the company to almost certain membership of the FTSE100 index at next month's redetermination. Nobody seriously doubts that the oil is there, but after Shell's shocker with its reserves, Cairn has sensibly gone for one of the best names in the business to check its drilling results.

 

DeGolyer boasts about its capability when it comes to "multidimensional, multiphase models of complex reservoirs" which surely should be a great comfort to the directors as they write the large cheque such capability commands.

 

Analysts, using a combination of Cairn's published statements and the backs of envelopes, driven by the need to find a cheerful story for their clients in a becalmed stock market, have already done their sums. They reckon that Cairn has discovered around 1.85billion barrels of the black stuff.

 

Here's a prediction, off the back of a chip wrapper: DeGolyer will conclude that there is between 1.5 and 2billion barrels discovered so far, and Cairn will conclude that the experts have done a fine job. After all, their real function here is not to find things that the roustabouts have missed, but to provide reassurance. Watching the lawyers circling over Shell, the Cairn directors probably think that whatever DeGolyer charges, they've got a bargain.

 

neil.collins@telegraph.co.uk

 

http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2004/08/19/ccom19.xml

 


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