Re Agreement

Cairn Energy PLC
02 September 2004


FOR IMMEDIATE RELEASE
                                                                2 September 2004

                                CAIRN ENERGY PLC

             Transaction and Strategic Alliance with ONGC in India

Cairn announces that approval has now been received from the Government of India
through the Cabinet Committee on Economic Affairs for the farm-out of certain
assets to ONGC and the farm-in to two exploration exploration blocks from ONGC.

Completion of the transaction is subject to execution of mutually acceptable
sale and purchase agreements between the parties.

The transaction comprises the following:

(i) The farm-out by Cairn to ONGC of a 90% operated interest in deep water
exploration Block KG-DWN-98/2 with an effective economic date of 30 September
2003. Cairn will retain operatorship of Block KG-DWN-98/2 until the closing
date, following which ONGC will assume operatorship under the terms of transfer
of operatorship agreements to be agreed between Cairn and ONGC.

ii) The farm-out by Cairn to ONGC of a 15% exploration interest in
Block CB/OS-2 and a 10% interest in the Lakshmi and Gauri Development Areas with
an effective economic date of 1 January 2003.

(together 'the Farm-out Interests')

(iii) The farm-in by Cairn from ONGC of a 30% working interest in each of Blocks
GV-ONN-97/1 onshore northern India, adjacent to the border with Nepal, and
CB-ONN-2001/1 onshore Gujarat, western India with an effective economic date of
30 September 2003 ('the Farm-in Interests'). Cairn will pay to ONGC a cash
consideration equivalent to the economic monetary value of the blocks as
assessed by ONGC at the time of bidding for the Farm-in Interests (evaluated by
Cairn).

ONGC will pay to Cairn a cash consideration of US$135 million for the Farm-out
Interests. The cash consideration will be adjusted to reflect net working
capital movements between the respective effective economic dates and the
closing date.

Subir Raha, Chairman of ONGC, commented:

'I am confident that there is a great future ahead for ONGC and Cairn working
together in alliance.'

Bill Gammell, Chief Executive of Cairn, commented:

'I am delighted to broaden our strategic alliance with our partner ONGC and I am
confident that our combined skills will lead to further success.'

Enquiries to:

Cairn Energy PLC:
Bill Gammell, Chief Executive Tel: [phone]
Mike Watts, Exploration Director Tel: [phone]

Brunswick Group Limited:
Catherine Hicks, 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. 'ONGC' where referred to in this release means Oil &
Natural Gas Corporation Limited and/or subsidiaries as appropriate.



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