Re Agreement

Cairn Energy PLC
14 December 2001

EMBARGOED FOR RELEASE AT 0700

                                                              14 December 2001


                               CAIRN ENERGY PLC


                   Block KG-DWN-98/2 Offshore Eastern India

                           Gas Marketing Agreement


Cairn announces that it has signed a Heads of Agreement ('HOA') with Gas
Authority of India Limited ('GAIL') for the sale of gas by Cairn to GAIL for
the Andhra Pradesh market.


The HOA provides that Cairn and GAIL will, on an exclusive basis, enter into
discussions forthwith with the intention of signing a Gas Sales Agreement by
Q4 2002. The gas will be supplied from Cairn's existing discoveries, including
the Annapurna gas field.


The HOA also provides that the parties will cooperate in the sharing of
information with respect to the market for natural gas in specified southern
Indian states and such other areas of India as they may mutually agree with a
view to agreeing additional gas sales agreements and/or a joint marketing
agreement for such markets.


Proshanto Banerjee, Chairman of GAIL, commented:


'We are pleased that we are able to leverage the success of our good relations
with Cairn and our pre-eminent market position to move forward with these gas
sales arrangements. There is an existing shortfall of gas in the Andhra
Pradesh market which we can meet using Cairn's gas and our existing
infrastructure. Our planned infrastructure expansion in southern India will
provide the opportunity to extend this successful relationship to other
markets.'


Bill Gammell, Chief Executive of Cairn, commented:


'This exclusive Agreement for the Andhra Pradesh market evidences the strength
of our relationship and builds on the success of our existing Gas Sales
Agreements with GAIL for the Ravva field. We look forward to repeating the
success of our other developments in the Indian subcontinent through early
monetisation of our substantial gas discoveries and additional potential in
the Krishna-Godavari basin.'


Enquiries:-


Cairn Energy PLC:


Bill Gammell, Chief Executive                        Tel: [phone]

                                                     07785 557 310

Dr Mike Watts, Exploration Director                  Tel: [phone]

                                                     07768 631 328


Brunswick Group Limited:

Catherine Bertwistle, Mark Antelme                  Tel: [phone]


Notes to Editors:-


 1. 'Cairn' where referred to in this release means Cairn Energy PLC and/or its
    subsidiaries, as appropriate.


 2. Cairn holds a 100% equity interest in Block KG-DWN-98/2.


 3. The key issues to be included in the Gas Sales Agreement are already
    detailed on a Term Sheet agreed between the parties and annexed to the
    HOA.


 4. To date Cairn has made the following hydrocarbon discoveries on Block
    KG-DWN-98/2:-


  * Prospect 'N' gas discovery, announced on 6 March 2001.

  * Prospect 'R' gas discovery (Annapurna), announced on 26 June 2001.

  * Prospect 'P' oil and gas discovery, announced on 1 August 2001.

  * Prospect 'M' oil discovery, announced on 24 October 2001.