Cairn to Declare Mangala Discovery Commercial

Norman Murray, Cairn's Chairman said at the Company's annual general meeting that the Board is delighted with the exploration successes in Rajasthan and the overall performance of the Group during the first four months of 2004.


The value of Cairn was transformed in January with the discovery of the Mangala oil field in northern Rajasthan. Subsequent discoveries at N-A in March and N-C in April, in the near vicinity to Mangala, have added further significant value. The appraisal program for these discoveries, comprising seismic, wells and testing operations, is now well underway. Preliminary negotiations for oil sales have also commenced with the Indian Government's nominated buyer.

It is our intention to submit a Declaration of Commerciality to the Indian Government for Mangala and to have updated Mangala and N-A oil in place volumes and reserve estimates by the time of the interim results.

During April we conducted a cased hole test in a Fatehgarh reservoir of N-A-1, which flowed at 2,000 barrels of oil per day on a 32/64 inch choke. This is an improvement on the open hole test flow rate of 1,200 barrels of oil per day across the same interval obtained in March and confirms the reservoir quality at the well location.

In addition, we have recently carried out an open hole barefoot test in fractured basement below the Fatehgarh in the Saraswati-4 well. The well flowed at a stable rate of 1,084 barrels of oil per day of 41.5 degree API oil with 1,490 barrels per day of associated water on a 48/64 inch choke. This result confirms the basement as a viable secondary exploration target in the heavily faulted parts of the basin, and it may also be relevant to the potential at Raageshwari, where we have already tested modest volumes of gas from the basement above untested oil shows.

We now have four drilling rigs operating in Rajasthan, allowing us to conduct exploration, appraisal and development activities in parallel across the block.

Elsewhere in India, Bangladesh and Nepal

In Gujarat, the Gauri gas field commenced gas production in early April as scheduled and we also plan to commence an oil production test from a Gauri well later this year.

I am pleased to report that we have recently received Bangladesh Government approval for our acquisition of Shell's upstream assets in Bangladesh and therefore expect to complete the acquisition and transfer of operatorship of these assets in the near future. We also expect to complete the transaction and strategic alliance with ONGC announced in October last year during the first half of 2004, once the consent of the Indian Government to the transaction has been received.

In addition, we have signed contracts for two new exploration blocks in India awarded pursuant to the NELP-IV licensing round and we await Nepalese Government approval of the signature of contracts for five new exploration blocks in Nepal. In line with our strategic focus on South Asia, we have also completed the disposal of our interest in the Gryphon field in the UK North Sea.

Group production for the first quarter of the year was 28,969 barrels of oil equivalent per day net to Cairn (Q1 2003: 27,855 barrels of oil equivalent per day). Our financial flexibility and balance sheet strength mean that we remain extremely well placed to move forward quickly with the exciting growth opportunities in our asset portfolio and we look forward to the remainder of the year with confidence.'