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Cairn makes reserves-doubling Indian gas find

Shares in oil exploration group Cairn Energy Plc topped the list of mid-sized UK companies' share price gains on Tuesday after news of an offshore east India gas discovery that doubles its reserves.

Company officials and analysts have described this KG Basin exploration area south and west of Cairn's existing Ravva field as a potential 'company maker' for Cairn.

And its shares have outperformed the UK oil sector by over 25 per cent in 2001 so far on hopes for this and other Indian prospects. The stock had climbed over 6 per cent to 334 pence on Tuesday afternoon.

"This about doubles the existing reserve base which we have in the company," chief executive Bill Gammell said by telephone after the announcement.

"The challenge for us now is to see how we move forward to develop and commercialise it because on the east coast the gas market is not nearly as mature in terms of infrastructure as the west coast (of India where Cairn has other gas assets)," he said.

India already accounts for more than half Cairn's production base.

From a project it called Prospect R, Cairn put an initial reserve estimate of 0.75-1.0 trillion cubic feet of dry gas (up to 150 million barrels of oil equivalent) from the well, DWN-R-1, in its 100 per cent owned Block KG-DWN-98/2 26.5 kilometres offshore Andhra Pradesh.

Gammell said the group would now drill Prospect P on the same Block -- a prospect roughly half the size of Prospect R on initial estimates.

Prospect A -- a 'high risk' proposition further south and west from 'R', is being drilled at the moment and an update should be announced soon.

"Yes I think it will probably be this month," said Gammell.

Production 2004

Production from the find announced on Tuesday should be on stream sometime in 2004, Gammell said.

Asked whether the find meant there was less likelihood of future share buybacks after the group bought back some 15 per cent of its capital in 2000, Gammell said:

"I think it means at the moment that we are fully committed to exploration, yes. We are increasing our exploration programme."

Last year Cairn sank 48 million pounds into the business. This year 110 million is already budgeted including some development expenditure on the west Coast of India.

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