"2004 was the busiest year in Cairn's history and the Board is delighted with the continued progress and growth of the company in the early part of 2005.
The value of Cairn was transformed in 2004 by the Mangala oil discovery in Rajasthan. A further 11 discoveries on the block have highlighted the prospectivity of the acreage and the importance of this new petroleum province to Cairn and to India.
The Mangala field is the biggest discovery in India for 22 years and the draft Field Development Plan (FDP) has already been submitted to our joint venture partner ONGC and the Government of India. Development plans have also been submitted for the Aishwariya, Saraswati and Raageshwari discoveries. The anticipated approval for these plans is the end of 2005. We are consolidating and building on the exploration successes of 2004 and moving at pace to ensure that production begins from Mangala at the end of 2007.
Cairn anticipates formal approval shortly from the Government of India for an extension of the Exploration license for further appraisal over the northern part of the Rajasthan block, termed the Appraisal Area. In addition, an application for an extension of the southern area of the block has been submitted.
The northern extension is for 2,884 km2 of acreage in the north and west of the Rajasthan block. This Appraisal Area incorporates the Bhagyam and Shakti oil fields as well as several structures requiring appraisal and intervening tracts of untested acreage. One such structure, the N-I structure, has been successfully tested by the N-I-2 well which has encountered oil in the Fatehgarh formation.
The N-I discovery lies five km east of the Bhagyam field and 13 km north west of Mangala. The N-I-2 well encountered 21 meters (m) of net oil pay in high quality Fatehgarh reservoirs. The estimated oil column for the structure is 150 m. Preliminary volume estimates suggest the N-I field is larger than Shakti but smaller than Aishwariya with estimates for field in-place volumes between 35 and 70 million barrels.
The evaluation of N-I is at an initial stage but the discovery itself highlights the potential of the acreage between Bhagyam and Mangala where a 320 km2 3D seismic survey is planned.
It is expected that the Declaration of Commerciality, which is the first step before the preparation and submission of the FDP, for the Bhagyam and Shakti discoveries will be ready for submission by the end of June 2005. A 3D seismic survey around Bhagyam covering 125 km2 is also underway.
Elsewhere in Rajasthan, Cairn continues to drill a range of exploration and appraisal wells. Recent wells N-C-8, N-V-6 and N-V-7 have not encountered commercial hydrocarbons but provide useful low cost information to delineate the extent of the play in the Northern Area.
Indian Exploration Bid Round (NELP V)
For more than ten years India has been a focus for Cairn. NELP (New Exploration Licensing Policy) V has attracted an unprecedented level of international interest in India with very competitive bidding. Along with its joint venture partner in India, ONGC, Cairn has submitted nine bids for both onshore and offshore blocks including three in Rajasthan. For two of these blocks Cairn and ONGC have been joined as a bid partner by ENI.
Bidding for the blocks closed on 31st May 2005 and it is anticipated that the winning bids for NELP V will be announced by the Government of India on 31st July 2005 and contracts signed by the beginning of October 2005.
Elsewhere in India, Bangladesh and Nepal
Following successful in-fill drilling campaigns on the Lakshmi (offshore north-west India) and Sangu (offshore Bangladesh) gas fields, the group's entitlement production for the first five months of 2005 was 27,633 barrels of oil equivalent per day (boepd) net to Cairn. Production is in line with the company's expectations. Full year entitlement production for 2004 was 22,789 boepd.
In the deepwater block, in the K-G basin off the east coast of India, which we partially farmed out to ONGC, a three well drilling program will start in the next few weeks. Cairn has retained a ten percent interest in this block.
In Nepal, Cairn is carrying out studies on five exploration blocks and is continuing to monitor the political situation.
The strength of our balance sheet enables us to move forward on the key development projects in Rajasthan while maintaining an active exploration and drilling program providing potential for further growth."
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