Re Contract

Cairn Energy PLC
12 August 2004


EMBARGOED FOR RELEASE AT 0700

                                                                  12 August 2004

                                CAIRN ENERGY PLC

              Signature of Agreements for Nepal Exploration Blocks

Cairn announces that it has signed Petroleum Agreements for a 100% operated
interest in five new exploration blocks with His Majesty's Government of Nepal
(The Department of Mines & Geology). These blocks are Exploration Blocks No.1
(Dhangari), 2 (Karnali), 4 (Lumbini), 6 (Birganj) and 7 (Malangawa).

All of the blocks are located within the Terai plains that lie adjacent to 
Nepal's border with India. Exploration Block No.1 is approximately 300 
kilometres from Delhi. To date, only limited seismic acquisition has been 
carried out on the acreage and no wells have been drilled.

The first exploration phase on the acreage has a four year duration with seismic
acquisition obligations, and Cairn will now commence preparations for initial
data gathering operations.

Upon signature of the Petroleum Agreements, Cairn immediately relinquished all
designated national park and wildlife areas, amounting to over 2,700 square
kilometres, including the Royal Shuklaphat Wildlife Reserve in Block 1, the
Royal Bardia National Park in Block 2, the UNESCO Cultural World Heritage site
at Lumbini in Block 4, and the Royal Chitwan National Park in Block 6. It is
Cairn's policy not to conduct exploration or production operations in UNESCO
designated World Heritage Sites or those areas assessed by Cairn, in conjunction
with the relevant Governments, as environmentally sensitive.

Bill Gammell, Chief Executive, commented:

'We are delighted to have entered a new country in South Asia. We believe Nepal
has many of the fundamental geological elements required for future exploration
success and we look forward to commencing operations.'

Mr. Dinesh Chandra Pyakurel, Secretary to the Ministry of Industry, Commerce and
Supplies commented:

'His Majesty's Government is delighted to welcome Cairn Energy to Nepal. Cairn's
success in exploring for hydrocarbons in South Asia means that we look forward
with enthusiasm and confidence to working together with them in partnership.'

Enquiries to:

Cairn Energy PLC:
Mike Watts, Exploration Director                       Tel: [phone]
Kevin Hart, Finance Director                           Tel: [phone]
Malcolm Thoms, Group General Manager                   Tel: [phone]

Brunswick Group Limited:
Patrick Handley                                        Tel: [phone]

Notes to Editors:

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

2.      Exploration Block No.1 (Dhangari) covers a contractual area of 4,941
square kilometres of which Cairn is voluntarily relinquishing an estimated 305
square kilometres.

3.      Exploration Block No.2 (Karnali) covers a contractual area of 4,838
square kilometres of which Cairn is voluntarily relinquishing an estimated 968
square kilometres.

4.      Exploration Block No.4 (Lumbini) covers a contractual area of 4,965
square kilometres of which Cairn is voluntarily relinquishing an estimated 10
square kilometres.

5.      Exploration Block No.6 (Birganj) covers a contractual area of 4,880
square kilometres of which Cairn is voluntarily relinquishing an estimated 1,431
square kilometres.

6.      Exploration Block No.7 (Malangawa) covers a contractual area of 4,920
square kilometres.




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