Nunavut is closely watching an Arctic oil and gas search unfolding off the coast of neighbouring Greenland, where at least one exploration company says it has found oil and gas.

Scottish-based Cairn Energy says it found oil and gas this past summer at test wells in Baffin Basin, located off of Greenland's western coast and just hundreds of kilometres away from Canadian waters.

"The ocean doesn't have borders, so we share the waters," Nunavut Premier Eva Aariak told CBC News.

This summer's successful test drilling has set the stage for more activity next year, as well as the potential for billions of dollars to flow into Greenland's economy.

Paul Mayland, Cairn Energy's director of corporate planning and business development, told delegates at an Iqaluit business conference last week that the company is entering what is considered to be "a world-class frontier exploration country."

'Great opportunity'

Simon Thomson, Cairn Energy's commercial and legal director, said Greenland offers a "substantial opportunity" because it is an underexplored area.

"For a company like us, that's a great opportunity, because when you look around the world there's very few areas now that remain unexplored or substantially underexplored," he told CBC News.

Aariak said while Greenland is 10 years ahead of Canada in realizing the potential for offshore oil and gas, she is concerned with the risk of potential oil spills near Canadian Arctic waters.

"The federal government should establish stronger working relationships with Greenland and Denmark on environmental issues and protection for our shared waters," she said.

As for Nunavut's waters, Aariak said she would not be surprised if oil and gas companies eventually turn their attention there as well.

"If it's happening in Greenland, next to us, I'm sure there are entities that are eyeing the other side of the border too," she said.

However, Aariak would not say how her government would respond should those companies knock on Nunavut's door.

"We would have to look at it depending on what they want to do and where they would want to explore and all those kind of things," she said.