Cairn Seeking Extension of Exploration License

Cairn Energy requested from the Directorate-General of Hydrocarbons a one-year extension to implement Phase III of exploration under the production sharing contract (PSC) for the KG-OS/6 gas basin.

Cairn as the operator of the block made the application on the basis that the joint venture is "facing some difficult decisions regarding the timing of its work program and the requirements of the PSC in respect of the Phase III work program obligations."

Apart from this, Cairn says the joint venture is carrying out a detailed geo-technical site survey and that it is completing the comprehensive shallow hazard study. This will help to resolve the shallow water flow problem and facilitate re-drilling at Prospect 6 in the block.

Cairn is operating the block as a JV with the Videocon group. However, ONGC is the licensee for the block. ONGC has an option of buying up to 30% equity in the block if commercial recovery is made.

Cairn believes exploration objectives can be best met by drilling one more well during Phase II itself, before moving on to Phase III, which would begin on during July 2003. The company has initiated preparatory drilling activity, including searching for a "suitable" rig to re-drill the block. However, Phase II expires on June 30, 2003 and the weather timing constraints are likely to impact start of drilling operations. Cairn has, therefore, sought more time to begin drilling operations.

Cairn now wants a nine-month extension for the Phase II license to enable it plan and execute a "realistic work program" to re-drill the KG-6-I well and allow them to locate any sufficiently encouraging wells to possibly be followed up with for further exploration.