Re Contract

Cairn Energy PLC
26 September 2002

EMBARGOED FOR RELEASE AT 0700

                                                               26 September 2002


                                CAIRN ENERGY PLC

                              Block PKGM-1 (Ravva)
                            Arbitration Proceedings


Cairn announces that, in line with the dispute resolution provisions of the
Ravva Production Sharing Contract (the 'PSC'), it has commenced arbitration
proceedings with the Government of India.

The arbitration proceedings are in respect of various disputed items which
impact upon the calculation of the Post Tax Rate of Return and related shares of
cost and profit oil under the PSC. It is anticipated that the proceedings may
continue for some considerable time before an award is made.

Cairn has entered into two previous arbitrations with the Government of India
under the PSC, both of which were found in Cairn's favour.

Enquiries:

Cairn Energy PLC:

Bill Gammell, Chief Executive                                 Tel: [phone]
Jann Brown, Group Financial Controller                        Tel: [phone]

Brunswick Group Limited:

Patrick Handley, 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 22.5% equity interest in Block PKGM-1 (Ravva). The remaining 
      interests are held by Oil and Natural Gas Corporation (40%), Videocon 
      Petroleum Limited (25%) and Ravva Oil (Singapore) Pte Limited (12.5%).

3.    Cairn disclosed a contingent liability in respect of this issue in its 
      2001 Annual Report & Accounts.


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