Indian tax authorities last night slapped oil explorer Cairn Energy with a £1billion draft assessment order on a business transaction in the country seven years ago.
In retaliation, Cairn said it has instructed counsel to fight the notice, which the Edinburgh firm argues stems from retrospective legislation imposed in 2012.
Cairn Energy has completed work on the SNE-1 well in Senegal after failing to hit hydrocarbons at a lower target.
The company and its joint venture partners had previously discovered oil in the upper clastic target.
However the deeper target of Karstified and fractured Lower Crestaceous shelf carbonates returned no hydrocarbons, Cairn Energy said.
Cairn Energy has made a second oil discovery during its Senegal exploration programme.
The Scottish oil firm announced last month it had made an initial oil find it its FAN-1 exploration well in the West African country.
The SNE-1 well is located in 1,100 metres water depth and is 100km offshore in the Sangomar block.