The Scottish company that found a billion barrels of oil in India said it is still interested in Nepal but won't drill without a big improvement in the political situation in the country.

The new chief executive of Cairn Energy, Simon Thomson, said the company believes the licences it was awarded in the Tarai region in 2004 may contain the geological and commercial ingredients of success. But Thomson indicated Cairn may decide it has no future in Nepal unless there is a quick end to the political problems which have made it impossible to explore for oil and gas in the country so far.

"What has stopped us has been the political position, in that we just haven't been able to move forward with the activity that we wanted to do," Thomson (pictured, above) told Nepali Times.

"Nepal remains of interest," he added. "The question is can we actually move forward and generate activity? That remains to be seen."

Nepal's politicians will have to work hard to convince Thomson that the country should have a place on his agenda at Edinburgh-based Cairn, where he became chief executive in July last year. Thomson succeeded Sir Bill Gammell, a Scotland rugby star who is a friend of ex-US president George W Bush and went to school with Tony Blair, the former British Prime Minister.

During 30 years in charge, Sir Bill led Cairn on a push into South Asia which culminated in the company making a series of bumper finds in the desert in Rajasthan from 2004. Success in India propelled Cairn into the oil and gas premier league and won it a place in the elite FTSE 100 stock market index. Production from the finds will generate massive revenues for India and help the country slash imports.

Cairn Energy recently sold a controlling stake in the Cairn India operation to India's Vedanta Resources for $5.5 billion. The deal was finally completed in December following months of wrangling in India. Cairn Energy retained 22 per cent stake in the Indian operation. Directors will use some of the proceeds of the Indian success to fund the search for similar transformational finds in other countries.

On 24 January Cairn shelved plans to award Sir Bill Gammell �2.5m shares for his work on the Vedanta deal following pressures from some shareholders.

Cairn India's Sri Lanka subsidiary announced last year that it struck natural gas in Sri Lanka's offshore Mannar Basin in the very first well it drilled in the narrow strait. The company has spent $1.2 billion on a pioneering hunt for oil and gas in the icy waters off Greenland, and is also looking at the waters off Spain and off Lebanon in the Mediterranean.

A company spokesperson said Cairn will seek meetings with ministers and officials in Nepal to help management assess its options. Cairn Energy has an office in Kathmandu but has been focused on analysing data previously collected by others.

The company was awarded 100 per cent stakes in five licences in the Tarai, Chitwan and Dang region in August 2004. In August 2005, six months after former king Gyanendra seized political control, the company declared contractual force majeure, suspending its work commitments in view of the security situation, and lifted it again in January 2010.

Even if Cairn stays in Nepal it could be years before it produces any oil in the country. In the giant Mangala find in Rajasthan in 2004, Cairn struck oil seven years after it started work. Production from the field started in August 2009.

Mark Williamson is a business correspondent at The Herald, based in Scotland.

Read also:
Dirty business, PAAVAN MATHEMA
If we want to encourage investors we have to change the rules of the game

See also:
Is oil Nepal's next big bonanza?, MARK WILLIAMSON
A Scottish oil prospecting company is hoping to strike oil in the tarai, but what will it mean for these wetlands in Nepal?