Edinburgh-based explorer Cairn Energy yesterday hailed signs of a possible oil discovery in the untapped waters off the coast of Greenland.

Cairn – the only firm so far to have been granted permission to drill for oil offshore in Greenland – told investors there were “early indications of a working hydrocarbon system” in the Baffin Bay basin. The group said it had discovered gas in thin sands in the area, which signals potential for oil.

The news is expected to spark a rush of interest in the Arctic waters from the oil industry – but campaigners were quick to raise concerns in the wake of BP’s Gulf of Mexico oil spill disaster.

Greenpeace warned that Cairn’s announcement was “grave news” and threatened the fragile Arctic environment.