Drilling Report

Cairn Energy PLC
17 December 2004


EMBARGOED FOR RELEASE AT 0700
                                                                17 December 2004

                                CAIRN ENERGY PLC

                         Operational Update - Rajasthan

In January of this year Cairn discovered the Mangala oil field in Rajasthan,
North West India. The discovery, in high quality reservoir sands of the
Fatehgarh formation, has been independently assessed to contain 1 billion bbls
of STOIIP. In the period since the discovery Cairn has been continuously engaged
in an active appraisal programme which has enhanced the Company's understanding
of the Mangala Field. In parallel, drilling activity has continued on the
appraisal of other oil and gas discoveries and on a variety of exploration
prospects.

In total, the number of wells drilled by Cairn in the Rajasthan basin to date is
55, in comparison to over 4,000 wells drilled by ONGC in the larger, analogous
and mature Cambay basin to the south.

The activity highlights for the three months since the last report are:
Mangala

   • New 3D Seismic has confirmed a simple structure, with a potential small
     STOIIP increase.
   • Current secondary recovery factor estimates are between 22%-32% based on
     water flood.
   • Screening of appropriate EOR techniques are underway aiming for a
     further 5-15% increase in recovery factors.
   • The Mangala and Aishwariya fields production target raised to 80,000 to
     100,000 bopd.

Appraisal

   • Appraisal of N-A field, now named Aishwariya Field, complete. External
     review is underway.
   • Initial results from Raageshwari-4 deep gas test are encouraging;
     further appraisal is underway. The Raageshwari mean GIIP estimate has
     increased to more than 1 tcf.
   • Evaluation of the 852 km2 N-C extension area has been disappointing.
   • Preliminary Government approval through Management Committee for a new
     856 km2 extension area based on the N-V discovery.
   • Appraisal of N-V field expected to commence Q1 2005.

Exploration

   • N-R-2 new oil discovery in the Barmer Hill formation (5 km SE of N-R-1
     Discovery).
   • A 3D seismic survey over the N-R fields is due to commence December
     2004.
   • 8 exploration wells in north west of the block encountered residual oil
     in the Fatehgarh formation with some small oil columns in the Barmer Hill
     formation.

Bill Gammell, Chief Executive, said:

'I am delighted with the increased confidence in the recovery potential of the
Mangala field and the appraisal of the Aishwariya field. These two fields will
provide the core of the future developments in Rajasthan.

Whilst the appraisal of the N-C extension area has been disappointing, the
revised geological model has upgraded the potential of the N-V extension area.
The Raageshwari gas field is now considered to be a substantial gas find and it
highlights the deep gas exploration potential in the south. Oil discoveries in
the N-R area and the ongoing exploration programme continue to have the
potential to add further significant value.'

Enquiries to:

Cairn Energy PLC
Bill Gammell, CEO                                        Tel: [phone]
Mike Watts, Exploration Director
Kevin Hart, Finance Director
Malcolm Thoms, Director and General Manager
Phil Tracy, Engineering and Operations Director
David Nisbet, Head of Group Communications

Brunswick Group PPL
Patrick Handley, Mark Antelme                            Tel: [phone]


                   Conference Call Friday 17th December 2004
                         Analysts/ Institutions at 0930


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                              Operational Details

Mangala Field

The Mangala 3D seismic survey was completed in October 2004 and initial
interpretation confirms the field as a simple single tilted fault block. The
improved structural definition of the 3D indicates that the field boundary
faults are located further up dip than previously mapped, a fact that may result
in a positive adjustment to the oil in place volumes (STOIIP). The mapping of
the internal architecture of the main Fatehgarh reservoir is in progress and is
expected to be completed by Q2 2005.

The Mangala Field has been extensively appraised and field development planning
studies are continuing. The planned development involves water-flooding the
field and the preliminary estimates of the secondary recovery factor associated
with a water-flood range from 22% - 32% of the initial STOIIP for different
sub-units of the Fatehgarh reservoir. A number of pilot water tests are
currently being conducted at various locations in the field with the aim of
confirming the injectivity characteristics of the Fategarh reservoir. Separate
pilot tests, for extraction rate purposes, are being conducted on water
production wells. These studies are scheduled to be completed in early Q2 2005
and will provide further confidence in the secondary recovery factor estimates.

Cairn has also been conducting extensive reservoir modelling of the Fategarh
reservoir and the initial results of this modelling suggest that some
improvement to the secondary recovery factor could be achieved by a combination
of a higher density of development wells, optimized well patterns and
confirmation of the pilot water injection test results. These initial findings
are supported by analogies with similar fields in Venezuela, India, Canada, UK,
China and Indonesia.

Cairn also believes that the reservoir and fluid qualities at Mangala could lend
themselves to the application early in field development of EOR techniques.
Cairn is now working with North American experts in this area and is studying
potential methods such as polymer flooding and the use of surfactants. These
methods have the potential to raise the recovery factor by an additional 5% to
15% of the STOIIP. Method screening and fluid studies have started and an update
should be expected by early Q2 2005 as to their potential. Again, in support of
this work Cairn has drawn analogy with similar schemes applied to fields in
Canada, USA, Brazil, India, China and Europe. In India, EOR techniques are
applied by ONGC to its onshore fields in the Cambay basin to the south of
Rajasthan, in Gujarat State.

Once dynamic information is available after the field production start-up, then
a further phase of intensive infill drilling, which is common world-wide in
onshore developments, in combination with the secondary and tertiary recovery
techniques outlined above, will optimise recovery. In such circumstances, the
aspirational target for ultimate recovery for the Mangala Field is more than 40%
of in-place oil.

Cairn has also continued with in-field activity to support its field development
plans not only with the previously mentioned water injection work but also by
re-entering some of the appraisal wells in the oil column. This has included
conducting further longer flow tests to understand reservoir parameters and the
crude oil behaviour in more detail.

A series of production tests designed to assess reservoir sand strength have
been conducted at the Mangala-5 location with the following results:

•        A basal 20m zone previously tested open hole at only 80 bopd of 25 o
API oil has now flowed through cased hole at a sand free rate of 1,350 bopd. The
earlier open hole test tools are now interpreted to have been partially blocked
by sand production and therefore the test was misleading as to the actual zone
potential.
•        A second 13m zone previously tested at 1,786 bopd of 29o API oil using
open hole tools, whilst a cased hole test has now confirmed 1,900 bopd sand free
production with a higher flowing pressure at surface than in the open hole test.
•        A third test of a 13m zone in Mangala-5, which was untested previously,
has now flowed in cased hole at 4,030 bopd (sand free) of 29o API oil, on a 11/
2' choke and a flowing surface pressure of 225 psi. This test is the highest
single zone flow rate test conducted so far in the Mangala field. Such flow
rates confirm the high productivity of this reservoir. The zone tested here is
correlatable to the same reservoir zone tested 1.5 km away in Mangala-1ST at
2,800 bopd in open hole.

The data gathered from wells such as Mangala-5 is being incorporated into the
field development planning and provides further confidence that the Mangala
field will sustain a production plateau level of at least 75,000 bopd whilst
still maintaining prudent reservoir management to maximise recovery levels.

Aishwariya Field (previously the N-A Field)

The last Aishwariya appraisal well, N-A-5, drilled in the northern part of the
field encountered 53 m of net oil pay and tested a combined rate from 3 DSTs of
1,775 bopd of 29o API oil from a total of 36m tested. This well result
represents the highest level of net oil pay and flow rate achieved in the
Aishwariya Field appraisal and is indicative of a higher quality section in the
north of the field which is more akin to the Mangala Field.

The 3D seismic acquisition over the Aishwariya field was completed early in
December 2004. An external review of the STOIIP and reserves estimates for the
field is ongoing and will be presented as part of the year end results.

Although the STOIIP is lower than the Mangala field, many of the sub-surface
design aspects discussed above for the Mangala field, such as higher density
well drilling and application of EOR techniques, also apply to the N-A field.
Given its similar depositional environment and oil quality as per the Mangala
field, reservoir studies are ongoing to see if similar high recoveries are
achievable.

Mangala and Aishwariya Development

The FEED study for the Mangala and Aishwariya fields is currently scheduled to
be complete by end Ql 2005 and the FDP is scheduled to be submitted to the
Indian Government in the middle of 2005.

N-V Discovery

Following the award of an acreage extension by the Government of India,
appraisal drilling on the N-V discovery and its various sub-compartments is
planned to commence in January/February 2005. Initial STOIIP estimates for the
discovery sub-compartment cover a range between 80 and 220 mmbbls. The 856 km2
N-V extension area contains additional sub-compartments with independent
structural closure, which may or may not be oil-bearing. Further updates on this
activity and evaluation of the field are expected in April 2005.

N-C Discovery

In the northern extension area, granted on the basis of the N-C-1 discovery, 9
wells have been drilled which tested a number of separate fault
sub-compartments. Of these, the N-C-3, N-C-3Z and N-C-3/2 wells drilled 15 km
north of Mangala encountered 26o API oil in the Fatehgarh and Barmer Hill
sections. Wells N-C-2, N-C-3/3, N-C-4, N-C-5, N-C-6 and N-C-7, respectively
drilled 12 km, 17 km, 46 km, 33 km, 18 km & 23 km north of Mangala did not
encounter hydrocarbons, indicating these fault compartments have never been
charged and were most likely off the oil migration path.

The revised STOIIP estimates for the N-C discovery range from 30 - 80 mmbbls.
This is a significant downgrade of the initial expectation when the N-C-1
discovery well was originally announced in April 2004. The N-C-3/2 well is
planned to be put on pumped test in January 2005 to assess recovery of this
relatively viscous oil.

N-R-l Oil Discovery and N-R-2 Oil Discovery

The N-R-1 discovery, announced in September, and the new N-R-2 exploration well
were drilled 5 km apart on two separate culminations of a stratigraphic prospect
which are respectively 18 km and 23 km south east of Mangala. Both wells
encountered significant oil columns in a sandier facies of the Barmer Hill
formation and recovered 35o API oil on short tests. However both wells will
require stimulation to increase their initial productivities and application of
simple artificial lift techniques such as rod pumping to sustain rates.

Initial combined STOIIP estimates for the discoveries range between 50 and 500
million bbls. To aid with estimates of oil in place and to help locate future
appraisal wells in optimal reservoir facies, a 165 square km 3D seismic survey
will be acquired over the discoveries and the surrounding prospective area
commencing late December 2004.

Raageshwari Gas Field - Long Term Gas and Condensate Test

This is a relatively deep non-conventional volcanic reservoir with a gas column
in excess of 800 metres. The gas water contact has not yet been encountered.

The vertical Raageshwari-4 appraisal well was placed on a long term test with
the objective of establishing the flow characteristics of the reservoir, as well
as establishing the volume of gas that could be drained by this well.
Raageshwari-4, was flowed for over 4 weeks at a rate of 1.6 mmscfd of high
quality gas and 50 bpd of condensate.

As part of the continuing appraisal programme, a deviated well (Raageshwari-5),
is currently being drilled. The Gas Initially In-Place (GIIP) estimates have
been significantly increased for the discovery and currently range between 700
bcf and 2.3 tcf, with a mean of 1.4 tcf. Recovery rates for this type of
non-conventional reservoir are however expected to be relatively low (i.e. 20%
to 30%).

Deep Gas Potential

In addition to Raageshwari, the remaining deep gas portfolio in the southern
area of the block has significant potential and will be the target of an
exploration programme in the first half of 2005.

Gas supply from Raageshwari and/or other prospects could be a very important
part of fuelling the power requirements of the northern major oil field
developments, as well as potentially offering the opportunity for third party
gas sales.

Active Exploration Programme

A total of 8 exploration wells, N-K-1, N-K-1Z, N-H-1, N-X-1, N-L-1, N-I-1Z,
N-T-1 and N-W-1, drilled respectively 8 km, 8.5 km, 12 km, 17 km, 13 km, 15 km,
10 km and 15 km west of Mangala towards the N-V-1 discovery (20 km north west of
Mangala), all encountered residual oil in the Fatehgarh with small oil columns
in the Barmer Hill. These small Barmer Hill accumulations will require further
evaluation and appraisal. All of the structures in the north west area appear to
have been on the oil migration path and hence were once fully charged with
hydrocarbons.

The current exploration period for the Rajasthan PSC is scheduled to expire in
May 2005. Cairn intends to seek extensions to the term of the appraisal and
exploration period and in any case, the current exploration drilling programme
is scheduled to continue beyond May 2005 on those prospects within secured
Development Areas.

The number of drilling rigs has recently been reduced to 3 from 5 as a result of
delays in acquiring the N-V extension area. A work-over rig has been introduced
for testing purposes as the programme advances.

Currently, additional exploration wells are being operated 35 km south east, 64
km south west and 110 km south of Mangala. Further near term drilling activity
in the north of the block is to be targeted on the N-V extension area,
exploration prospects in the vicinity of Mangala and Aishwariya, and the south
and west of the block.

The planned forward programme also includes an exploration well 130 km south of
Mangala.

Future Plans

Cairn intends making a Pre-Close announcement in January/February 2005. The
Annual Results will be presented in April to allow incorporation of further
information regarding the Mangala and Aishwariya development, including the FEED
study. A formal ceremony to name the N-C and N-V discoveries will take place in
January in Rajasthan.



Notes to Editors
•         The Mangala discovery in the Thar Desert of the North West Indian
state has an estimated one billion barrels of oil in place according to DeGolyer
and MacNaughton, the Independent Oil Reserve Specialists.
•         The Management Committee consists of representatives of the Government
of India Nominees and Contractor.
•         Cairn has received formal approval from the Government of India for a
DOC in respect of the Mangala, Aishwariya, Saraswati and Raageshwari
discoveries. The approval secures Cairn an extensive Development Area of 1,858
square kilometres which also incorporates the as yet, un-appraised, GR-F,
Kameshwari, N-R and Guda discoveries.
•         The Development Area is retained until 2020 with options for further
extension subject to mutual agreement with the Government of India.
•         The DOC is part of the process from discovery of the oil through to
the formal process of developing the field.
•         In order to conform to the terms of the Production Sharing Contract
(PSC) additional consents and permissions will require to be obtained before
production finally commences.
•          Under the PSC, ONGC has 90 days from the date of the DOC, which is
15th October 2004, within which to acquire a 30% interest in the development.
•         The Development Area that includes Mangala and Aishwariya is
approximately the equivalent to the size of 12 North Sea Blocks.
•         India currently imports around 2 million barrels of oil a day. It
produces 650,000 bopd, of which 50,000 bopd comes from the Cairn operated Ravva
field.
•         Information on the operations on the Ravva Field, the CB-OS/2 fields
and Sangu Field in Bangladesh, including updated production figures, are
available on the Cairn Energy website. Address www.cairn-energy.plc.uk
•         'Cairn' where referred to in this release means Cairn Energy PLC and/
or its subsidiaries, as appropriate.

There are matters discussed in this media information that are forward looking
statements. Such statements are only predictions and actual events or results
may differ materially. For a discussion of important factors -which could cause
actual results to differ from the forward looking statements, refer to the
Company's annual report and accounts for the year ended 2003.

Glossary

API     American Petroleum Institute units as a measure of oil specific gravity
bbls    barrels of oil
bcf     billion cubic feet of gas
boe     barrels of oil equivalent
boepd   barrels of oil equivalent per day
bopd    barrels of oil per day
DOC     Declaration Of Commerciality
DST     Drill Stem Testing
EOR     enhanced oil recovery
FEED    front end engineering and design
FDP     field development plan
GIIP    gas initially in place
/mcf    per thousand cubic feet of gas
mmscfd  million standard cubic feet of gas per day
ONGC    Oil & Natural Gas Corporation Ltd and/or its subsidiaries as appropriate
PSC(s)  Production Sharing Contract(s)
Psi     Pounds per square inch
STOIIP  volumetric estimation of original oil in place





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