Drilling Report

Cairn Energy PLC
8 January 2001

                                
                                 CAIRN ENERGY PLC 
                              
                     Update on Indian Drilling Operations                     
                 'Ambe' Gas and Oil Discovery - Block CB-OS/2                 

Cairn announces the following update on its two rig drilling operations in
Block CB-OS/2, offshore Gujarat in Western India:-

Ambe Gas and Oil Discovery - Prospect 'C'

Cairn has made a second hydrocarbon discovery on Block CB-OS/2 with its
exploration well CB-C-1, located approximately 25 kilometres west of the
Lakshmi gas discovery. The well reached a total depth of 1,600 metres and
encountered several hydrocarbon pay zones below 798 metres.

Two zones tested and flowed gas at a cumulative rate of 41 million standard
cubic feet of gas per day on a 96/64' choke. A third zone flowed oil at
varying rates between 150 and 500 barrels of oil per day. Two other tested
zones had inconclusive results. A 3D seismic programme to further delineate
Lakshmi and Ambe is scheduled to commence in January 2001. Further appraisal
drilling is required on Ambe and a planned appraisal well is expected to spud
in Q1 2001. Current gross reserve estimates for the discovery are between 50
and 200 billion cubic feet of gas equivalent.

Future development options for the Ambe discovery are being considered,
however conceptually, the field could be tied back as a satellite development
to Lakshmi.
 
Following cessation of operations on CB-C-1, the next well in the drilling
sequence targets exploration prospect 'G', which is located approximately 10
kilometres north of Lakshmi. 

Prospect 'E'

The CB-E-1 exploration well drilled to a total depth of 1,491 metres on
prospect 'E' has been plugged and abandoned as a dry hole after encountering
sub-commercial gas volumes.

Prospect 'B'

Cairn is currently operating a well on exploration prospect 'B,' which is
located approximately 5 kilometres southeast of Lakshmi. The well has reached
a total depth of 1,315 metres and logs indicate multiple potential pay zones.
Preparations for a testing programme are underway. 

A further update on operations and well results on Block CB-OS/2 will be
provided in due course. 

Bill Gammell, Cairn's Chief Executive commented:-

'Cairn has made an excellent start to its extensive exploration programme in
India. Following the first discovery at Lakshmi last year, this new discovery
at Ambe and the promising initial results from prospect 'B' are exciting
developments in an area of strong energy demand.'


Enquiries:-

Cairn Energy PLC:                     

Bill Gammell, Chief Executive                     Tel:       [phone]
Dr Mike Watts, Exploration Director               Tel:       [phone]    
Kevin Hart, Finance Director                      Tel:       [phone]

Brunswick Group Limited:

Victoria Sabin                                    Tel:       [phone]
Melissa Miller                                    Tel:       [phone]


Notes to Editors:-

1. Cairn holds a 75% equity interest in Block CB-OS/2 and is Operator for the
Joint Venture which includes TATA Petrodyne Limited (15%) and ONGC (10%). ONGC
has a right to increase its stake by 30% in respect of each commercial
discovery made on the Block. If ONGC exercise this right, Cairn's equity
interest in respect of any such discovery would reduce from 75% to 50%.
 
2. 'Cairn' where referred to in this release means Cairn Energy PLC and/or its
subsidiaries, as appropriate.

3. The gas tested in CB-C-1 is dry methane and contains no carbon dioxide or
hydrogen sulphide. The crude oil tested in CB-C-1 has an API gravity of 25
degrees with a low gas to oil ratio of 120 standard cubic feet per stock tank
barrel.