Combating climate change

Cairn acknowledges the potential adverse effects of climate change on a global scale and the role we have as a responsible business in responding to this complex issue. In the Arctic in particular, impacts from climate change create challenges for oil exploration and production. Cairn recognises that rising to these challenges in such a sensitive environment requires the highest levels of care.

Our climate change strategy, updated in 2008 as part of our CR Guiding Principles and reviewed again in 2009, comprises four elements:

• GHG measurement, verification and reporting;
• maintaining energy and emissions efficiency;
• demonstrating informed and transparent action on climate change; and
• contributing to programmes that address the environmental and social impacts of climate change.

Since 2000, we have been monitoring and setting targets for both methane (CH₄) and GHG emissions from our production facilities. We have introduced a number of initiatives to reduce these emissions including:

• the installation of high-efficiency flares;
• third-stage compression facilities, which increase gas recovery from the oil/gas mixture for use as fuel gas and reduce losses to flaring; and
• improving plant operations to minimise gas emissions. This can include improving the way we operate to reduce plant upsets that usually require releases to flare.

Greenland

Against a backdrop of growing demand for energy, oil is a vital resource and so the oil and gas industry continues to develop new sources of supply to meet today's energy needs. The Arctic represents one of these potential new sources and our planned exploration wells off Greenland are at the forefront of exploration in this region.

We believe that by operating responsibly and proactively, we can access new energy resources without impacting adversely on the local environment. In particular:

• we aim to provide economic development while minimising negative impacts on the Arctic environment and the people of Greenland
• we share the goal of preventing and mitigating negative aspects of climate change and support adaptation to inevitable changes
• we are also committed to reducing greenhouse gas emissions in our global operations and have been monitoring our emissions for many years.

Thinking Locally, Acting Globally

The Intergovernmental Panel on Climate Change (IPCC) states that during this century, the Arctic is likely to warm and sea ice may decrease in both extent and thickness; the thawing of permafrost and increased coastal erosion are also predicted by the IPCC. These potential changes to ecosystems mean we use the utmost care in considering the rate and scope of economic development within this region.

However, changes in the region may also provide opportunities. For example, the melting of sea ice is progressively opening access to resources. This could provide the ability to navigate new routes through these northern waters, which could attract investment and provide jobs to local communities.

Any new development of resources in this region will generate increasing scrutiny, including potential contribution to climate change. However, climate change is a global issue and any specific impact on the region is more likely to be determined by global emissions of greenhouse gases rather than local development alone. That is why we are focused on pursuing development in a responsible manner in the region while addressing the issue of greenhouse gas emissions through greater efficiencies.

Cairn will work with the Greenland Government, its suppliers and other stakeholders to develop and implement appropriate actions to control greenhouse gas emissions while promoting exploration to secure supplies of oil and gas. Throughout our 2008 and 2009 survey activities, we have monitored fuel use and greenhouse emissions from our vessels, even though these impacts are relatively small. During the planned 2010 drilling campaign, we will be tracking and reporting our emissions.