India Grants Cairn Extension for Rajasthan License Appraisal

The Government of India (GoI) has awarded Cairn India a six-month extension to the Exploration Phase of the Northern Appraisal Area (NAA) of the Rajasthan license RJ-ON-90/1 in Northwest India from May 2007.

The granting of the extension will allow Cairn India to carry out an appraisal program to delineate and explore the full potential of the Northern Appraisal Area (NAA), which covers an area of 879 square kilometers (km2). These discoveries have opened up a new play in the lower Dharvi Dungar sands on the western margin of the Rajasthan basin.

--The Kameshwari West-2 discovery is located 12 km northwest of the 2003 Kameshwari discovery and 56 km south of the Mangala field. The well encountered 18.2 meters (m) of net pay in the lower Dharvi Dungar formation from a gross interval of 40 m. From formation pressure data a gas gradient and an oil gradient have been defined in the well. A Gas Oil Contact (GOC) at 1227.5 m MDBRT (1127 m TVDSS) and an Oil Water Contact (OWC) at 1247.7 m MDBRT (1147 m TVDSS) have been confirmed.
--Open Hole Drill Stem Testing (OHDST) has been carried out and the well was flowed for approximately 7 hours at an average liquid rate of 450 barrels of liquid per day and 0.06 mmscfd on a 32/64" choke with a water cut of 50%. The oil API is 33 degrees.
--The Kameshwari West-3 discovery is located 10.6 km to the north of Kameshwari West-2 and encountered up to 16 m of gas pay in tight lower Dharvi Dungar reservoir rock in a potential column of over 100 m. The well TD is 1499 m MD. Two DSTs were conducted and test results in the upper interval confirmed the presence of a gas pool that flowed at approximately 75,000 scfd. The deeper test of the potential oil accumulation remains inconclusive due to the tight nature of the reservoir rock.

The area is covered by 350 km2 of 3D seismic data acquired in 2006. Further operations will re-commence in the NAA with exploration well Kameshwari West "M."

In June 2005, Cairn was granted an 18-month extension (until 14 November 2006) to complete its activities in the northern appraisal area to the north and west of the Development Area. However, the work program in this area was interrupted by the severe flooding in Rajasthan in 2006. Cairn India ceased operations in this area and entered discussions with the GoI for a further extension of part of this acreage to complete its planned work program.

Rahul Dhir, Chief Executive Officer of Cairn India, said:

"Cairn India is delighted to have secured this extension in order to further evaluate the potential of this area. The two discoveries confirm our belief that the Rajasthan basin is world class and will continue to add incremental value."

Cairn India is headquartered in Gurgaon on the outskirts of Delhi, with operational offices in Chennai, Gujarat, Andhra Pradesh and Rajasthan.

On 9 January 2007, Cairn successfully concluded the flotation of its Indian business with the commencement of trading of Cairn India Limited on the Bombay Stock Exchange and the National Stock Exchange of India. Cairn Energy PLC currently holds a majority shareholding in Cairn India Limited.

Cairn India is currently focused on exploration and production in India, where it has a working interest in 15 blocks--two of which are producing hydrocarbons. The company holds material exploration and production positions in west India and east India, along with new exploration rights elsewhere in India.

This focus on India has already resulted in a significant number of oil and gas discoveries. In particular, Cairn India made a major oil discovery (Mangala) in Rajasthan in the northwest of India at the beginning of 2004. Cairn India has now made 22 discoveries in Rajasthan block RJ-ON-90/1.

In Rajasthan, Cairn India operates Block RJ-ON-90/1 under a Production Sharing Contract (PSC) signed on 15 May 1995. The main Development Area (1,858 km2), which includes Mangala, Aishwariya, Saraswati and Raageshwari, is shared between Cairn India and ONGC; Cairn India holds 70% and ONGC has exercised their back in right for 30%. A further Development Area (430 km2), including the Bhagyam and Shakti fields, is also shared between Cairn India and ONGC in the same proportion. Cairn India has a 100% interest in the Northern Appraisal Area.

India currently imports approximately 2,000,000 barrels of oil per day (bopd). It produces approximately 700,000 bopd itself, of which approximately 50,000 bopd comes from the Cairn India-operated Ravva field on the east coast of India.