Drilling Report

Cairn Energy PLC
18 July 2005


EMBARGOED FOR RELEASE AT 0700

                                                                    18 July 2005

                                CAIRN ENERGY PLC

                    Pre-Close Trading and Operational Update

Cairn intends to announce its interim results for the six months to 30 June 2005
on Tuesday, 20 September 2005. In advance of these results, Cairn is providing
an update on recent operations and guidance in respect of the Group's trading
performance in 2005. This information has not been audited and is subject to
further review.

Operational Overview

Cairn currently estimates the total oil in place, in all 12 existing discoveries
to date in the Rajasthan basin, excluding gas, to be in excess of 2.5 billion
barrels (bbls).

Main Rajasthan Fields

Cairn is making good progress in its efforts to fast track development of the
three largest discoveries to date in the north, namely Mangala, Bhagyam and
Aishwariya. The combined 2P (proved plus probable) oil in place for the
Fatehgarh reservoir in these three fields has been independently certified to be
1.64 bbls. Cairn estimates the associated reserves based on secondary recovery
are at least 500 million barrels. Additional recovery from Mangala and Bhagyam
using enhanced oil recovery (EOR) techniques has the potential to add up to a
further 150 mmbbls of reserves.

The combined production target for these three northern fields is currently
planned to be between 120,000 and 150,000 barrels of oil a day (bopd). First oil
production from Mangala is scheduled for the end of 2007.

Other Rajasthan fields and discoveries

Cairn has previously announced a further nine discoveries in the basin. Subject
to successful appraisal it is intended to develop these discoveries. While
concentration over the last 18 months has been on the rapid evaluation of the
high quality Fatehgarh reservoirs in the north, in the southern area there are a
variety of lower quality reservoirs which may have significant value potential.
An active appraisal programme is underway to further delineate these other oil
plays and ultimately estimate recovery factors and reserves.

   •Thumbli formation

The Thumbli reservoirs are of varying quality and occur in the central and
southern areas of the block. The maximum natural flow rate (unstabilised)
achieved in a Thumbli test has been 1585 bopd of 36 degree API oil in
Raageshwari-3. Recent wells, such as Raageshwari-6, which tested 550 bopd and 5
mmscfd, have confirmed the producing potential of this formation which is a
target for future exploration and appraisal activity.

   •Dharvi Dungar formation

The Dharvi Dungar is present in the central basin area and to date has only been
targeted by a few wells. The original Rajasthan discovery well, Guda-2, tested
2,000 bopd of 38 degree API oil under natural flow, from the Dharvi Dungar.

   •Barmer Hill formation

The Barmer Hill is a tight siltstone in the north of the block where discoveries
have yet to be evaluated. The relatively poor reservoir characteristics mean
that stimulation by fraccing will be required. In the central area the Barmer
Hill in Saraswati-1 has produced 62,000 bbls over two long term tests totalling
70 days.

Development of the southern area fields will typically require a high density of
wells, but with the potential for rapid payback of development expenditure.
Plans are being developed to advance production in the southern fields during
2006 via a trucking operation.

Since the last operational update in June 2005 a number of exploration and
appraisal wells have been drilled across the basin. A new small Fatehgarh
discovery has been made in the north near the existing Shakti field. The recent
appraisal drilling and testing activity has concentrated in the southern area in
and around the Raageshwari Guda and GR-F discoveries.

An 18 month extension of the exploration licence in the northern area was
granted in May 2005. A 3D seismic crew is continually active in parts of the
block.

Rajasthan - Development

The final draft of the Field Development Plans for the Mangala, Aishwariya,
Saraswati and Raageshwari fields is scheduled for submission in August 2005 to
our joint venture partners ONGC for a final review, after which they will be
submitted to the Government of India for approval.

The front-end engineering design (FEED) for the Mangala field development is
largely complete and the selection process for the detailed engineering design
contractor is underway.

The Declaration of Commerciality for the Bhagyam and Shakti discoveries, which
is the first step before the preparation and submission of the Field Development
Plan, has been submitted to our joint venture partners ONGC for review. It is
planned that the development of these discoveries will be integrated with the
development of the Mangala and Aishwariya discoveries.

Under the terms of the Rajasthan Production Sharing Contract (PSC), the
Government of India is in the process of appointing its nominee to take delivery
of the oil produced from these discoveries.

Production

Following successful in-fill drilling campaigns on the Lakshmi (offshore
north-west India) and Sangu (offshore Bangladesh) gas fields, the group's
entitlement production for the first six months of 2005 was 27,900 barrels of
oil equivalent per day (boepd) net to Cairn. Full year entitlement production
for 2004 was 22,789 boepd. Current production is in line with the company's
expectations.

Production boepd     Ravva    Sangu       Lakshmi & Gauri                Total
(approximate)
Gross field          65,000      23,000                   15,000       103,000
Working interest     14,625      17,250                    6,750        38,625
Entitlement interest  6,900      13,500                    7,500        27,900

Due to the Group's current production mix being heavily gas biased and the
existence of contractual caps on the price received for this gas, the average
price realised for the six months to 30 June 2005 is expected to be in the
region of $24 per boe (2004 $24.06).

Elsewhere in India and South Asia

In the deepwater block of the K-G basin off the east coast of India, partially
farmed out to ONGC, a three well drilling programme is planned. Cairn has
retained a ten percent interest in this block.

The results of bidding for new exploration blocks in India are expected to be
announced around the end of July. This fifth exploration round has attracted a
high level of international interest in India with very competitive bidding.

Bill Gammell, Chief Executive of Cairn said:

'Cairn is now moving rapidly from discovery to production in Rajasthan. As we
continue exploration and appraisal, it is very clear that this basin will not
only provide substantial oil production and cash flow from the large northern
fields but will also provide future growth and re-investment potential for Cairn
from other reservoirs and smaller fields, both discovered and yet to be
discovered.'

Enquiries to:

Cairn Energy PLC:
Analysts
Bill Gammell, Chief Executive Tel: [phone]
Mike Watts, Exploration Director
Kevin Hart, Finance Director
Media
David Nisbet, Head of Group Communications

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

Notes to Editors:

   •Cairn focuses its activities on the geographic region of South Asia. The
    Group holds material exploration and production positions in west India,
    east India and Bangladesh along with new exploration rights in northern
    India and Nepal.

   •This focus on South Asia for more than ten years has already resulted in
    a significant number of oil and gas discoveries. In particular, the company
    made a major oil discovery (Mangala) in Rajasthan in the north west of India
    at the beginning of 2004.

   •In 2002, Cairn was granted a three year extension of the exploration term
    of the entire Rajasthan block comprising 6,688 km2 until 15th May 2005. In
    October 2004 part of the block was converted from an exploration term to a
    production term forming a 1,858 km2 Development Area.


   •Northern Appraisal area awarded for 18 months from May 15th 2005.


   •ONGC took up its option to acquire a 30% participating interest in the
    Mangala and Aishwariya discoveries in January 2005.


   •The total of Cairn discovered fields in Rajasthan is 12. To date July
    18th 2005 91 wells have been drilled in Rajasthan.


   •The first part of the Northern seismic programme includes the 3D survey
    covering an area of 125 km2 in the vicinity of the Bhagyam discovery which
    has been completed. In parallel with this, an additional 40 kilometres of 2D
    seismic over the N-I-2 discovery has been acquired to assist with selecting
    an early appraisal well location, while a 3D survey, covering an area of 320
    km2 between Mangala and Bhagyam, including the recent N-I-2 discovery, has
    started and is expected to be complete by early October 2005. Currently, a
    3D survey over the Kameshwari discovery is also planned.


   •Three wells have recently been successfully tested in the Thumbli
    reservoir of the Southern part of the block: the GR-F2 appraisal well flowed
    at 200 bopd of 38 degree API oil from an 8 metre zone in June; the Guda-3
    appraisal well tested an average 60 bopd of 35 degree API oil from a 5 metre
    zone in July; the Raageshwari-6 well tested 550 bopd of 26 degree API oil
    and 5 MMscfd of gas in the Upper Thumbli, also in July from a 3 metre zone.
    The maximum combined flow rate achieved in a Thumbli test to date was 1585
    bopd of 36 API oil in Raageshwari-3 in 2004.


   •The Guda-3 well was also used to test the deeper reservoir
    characteristics of the Dharvi Dungar formation. Guda 3 flowed 2800 barrels p
    er day of water on test from the Dharvi Dungar formation, confirming good
    reservoir characteristics and the potential of this formation as a future
    exploration and appraisal target. Three kilometres to the north of Guda-3,
    the original basin discovery well Guda-2 has tested this similar sand
    package at 2000 bopd of 38 API oil in 1999. A recent pressure survey in
    Guda-2 indicated that although depletion was observed in 1999 the pressure
    has now built back to original reservoir pressure, and an extended test of
    this well is planned in the near term.


   •India currently imports approximately two million barrels of oil a day
    (bopd). It produces 650,000 barrels a day itself of which 50,000 bopd comes
    from the Cairn operated Ravva field.


For further information on Cairn see www.cairn-energy.plc.uk

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 2004.



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