BP's devastating oil spill is jeopardising future offshore exploration – including Cairn Energy's Greenland venture

VIDEO footage of oil gushing from a ruptured pipe more than a mile below the surface of the Gulf of Mexico has transfixed the world and for Tony Hayward, the chief executive of BP, every escaping barrel is blackening his name.

He has been getting hate mail, constant calls from the US cabinet, including the secretary of the interior Ken Salazar. He is not sleeping well. "I will be judged by the response," said Hayward from BP's control centre in Houston, as he acknowledged his career is on the line. And so is the role of the offshore drilling industry as policy makers across the world rethink the dangers of recovering oil from the deep-sea bed.

In the wake of the oil leak, US lawmakers are considering a climate change bill that could allow states to veto offshore drilling plans. Already the Republican senator for California, Arnold Schwarzenegger, has withdrawn a modest plan for new drilling off the state's coast.

US president Barack Obama has called a moratorium on offshore drilling licences, overturning a proposal to open vast expanses of American coastlines to oil and natural gas drilling made just weeks before the deadly explosion of BP's rig, Deepwater Horizon, in the Gulf of Mexico. Only tracts in the Chukchi Sea and Beaufort Sea in the Arctic Ocean north of Alaska – nearly 130 million acres – remained eligible for exploration and drilling.

But tomorrow Royal Dutch Shell will face appalled US regulators demanding assurances that Alaska, where Shell is preparing to commence drilling in July, won't become the next disaster to rival that unfolding now in the Gulf of Mexico.

While the US puts its own offshore drilling industry on ice, around the world people are scrutinising new plans for offshore exploration elsewhere. The environmental group Greenpeace has renewed calls to ban offshore drilling in as much as 40 per cent of the world's oceans.

For Cairn Energy, such calls are a worry. The Edinburgh-based oil explorer is betting $400 million (272m) this year on striking oil off the west coast of Greenland where it plans to dig exploratory wells in June and July.

Cairn's prospect off Disko Island sits north of the Davis Strait. The body of water, between Canada's remote Baffin Island and Western Greenland, is known as "iceberg alley", where huge chunks of ice calve from northern glaciers and make their way into the northern Atlantic.

Environmentalists argue a similar disaster to that of the Gulf of Mexico would be worse in the Arctic, where icebergs, winter darkness and remoteness from nearby ports where booms or skimmers could be dispatched are major concerns.

"The blowout (in the Gulf of Mexico] is pretty disastrous for anyone planning to start offshore operations in ecologically fragile areas," said Jonathan Stern, director of gas research at the Oxford Institute for Energy Studies. "It was already going to be tough in the Arctic."

But Greenland is one of the key areas as global warming – ironically – opens up the Arctic to oil and gas explorers. Technology too has changed dramatically since the last time, 30 years ago, that drills began testing the region's virgin sea beds. Despite having no domestic oil industry, Greenland is believed to have massive undiscovered reserves. The US Geological Survey, which estimates that some 50 billion barrels of oil may be found offshore, puts it on its list of top ten countries in the world for undiscovered oil.

This summer Cairn will be the first to drill again off Greenland in 30 years. A spokesman for the FTSE 100 firm said the concerns emerging over the BP oil spill in the Gulf of Mexico were not material to Cairn's interests there. "We are not deep water," he said. "We are only in 300ft to 700ft, which is nothing compared to the Gulf of Mexico."

But others are not so sure. Nathan Piper, director of oil and gas research at RBC Capital Markets in Edinburgh, said: "It is still reasonably deep. You couldn't swim down to touch the bottom and come back up again. But it is not as technically challenging as drilling in the Gulf of Mexico is currently."

Sir Bill Gammell and the board of Cairn will hold its annual general meeting this week in Edinburgh, and the firm will have to address the offshore issue to its investors. Although it has no prospects offshore the US, Cairn's stock has fallen 5 per cent since US regulators began gunning for deep sea oil explorers. Last week crude dropped to near $73 a barrel and stocks for BP, Shell and BG Group were down between 1.6 per cent to 3 per cent.

But as Piper points out, Cairn is one of the few oil and gas explorers to be eligible for investment from some ethical funds as a result of its work – both socially and environmentally – in India. And although Cairn only has expertise on dry land mining the deserts of Rajasthan, the firm has already taken precautions to ensure that drilling in Greenland goes smoothly.

"One of the reasons they have two rigs rather than one is if anything goes wrong they are in a position to do something about it," says Piper. "They do realise the eyes of the world are on them."

Officials from eight Arctic countries, including Canada, will meet in Greenland next month to discuss possible environmental risks of oil exploration and production in the region. Last autumn, seven companies with drilling licences, including Cairn, formed the Greenland Oil Industry Association to exchange expertise and liaise with the government on environmental and other issues.

Dr Brad MacKay, director of MBA at Edinburgh Business School and a green policy expert, believes that green campaigners will fail to see an outright ban on offshore drilling brought in place. He predicts that there will be more effort and investment in renewable energy sources as a result of the BP disaster, but argues the world is still too heavily reliant on hydrocarbons.

"What will decide if the environmentalists win on this issue is whether or not it is viable not to mine oil – and what the consequences are of not doing so," MacKay says. "The environmentalists are right to point out the dangers and the risk in that sort of area. But once the heat is taken out of this issue, what will wind up happening is you will have regulation and legislation that will increase the safety mechanisms associated with this sort of drilling. Rather than seeing it as a full stop, it is more an approach to risk management."

Even BP's embattled Hayward is not succumbing to pessimism about offshore drilling bans. "It would undoubtedly be a transforming event in the industry," said Hayward of the spill. "But Apollo 13 did not stop the space programme."

Hayward may also be consoled by the fact that the biggest US oil spill disaster – before now – did not take down the firm behind it, Exxon, although its name is inextricably linked with the ship that spilled 250,000 barrels of crude oil into Alaska's Prince William Sound more than 20 years ago.

For BP the cost has been great. In addition to untold reputational damage, the slick has already cost the firm $450 million (305m) as more than 500 boats, 14 staging areas and 500km of boom have been deployed to clean up the mess.

Obama has proposed scrapping a cap on BP's liability for the spill. Currently responsible parties – in this case BP – are required to pay up to $75m in clean-up costs from oil spills, a law that was passed in 1990 after the Exxon Valdez disaster.

But Democrats are now said to be introducing legislation to raise that cap to $10bn, with the administration also raising taxes on the industry to create an "oil spill fund" that would help with clean-up, monitor seafood safety and study offshore drilling practices.

BP has already lost some $20bn in stock market value, sure to hurt its reputation in the industry even further, and then there are the fees: nearly 100 lawsuits have been filed to date across the Gulf region, with US lawyers expecting billions of dollars' worth of potential liabilities.

But as yet there is no lessening in demand for oil. And as sources of oil in easy areas of recovery are depleted, oil exploration is set to continue to go deeper, or into more environmentally or politically sensitive areas. Piper points out that hundreds of offshore wells continue to be drilled – largely safely and without incident – around the world every year.

"It is very sad BP has run into difficulties," says Piper. "But the oil and gas industry has been drilling offshore for decades – in the North Sea it has been going since the 1960s. It is not impossible to drill offshore without causing trouble, but in this case it has gone catastrophically wrong."