Re Agreement

Cairn Energy PLC
01 October 2003


FOR IMMEDIATE RELEASE


                                                                  1 October 2003


                                CAIRN ENERGY PLC

                  Transaction and Strategic Alliance with ONGC

Cairn announces that it has signed a Heads of Agreement with Oil & Natural Gas
Corporation Limited ('ONGC') for the farm-out of certain assets to ONGC, the
farm-in to two exploration blocks from ONGC, and the formation of a strategic
alliance for future opportunities.

The proposed transaction with ONGC is subject to, inter alia, finalisation of
mutually acceptable sale and purchase agreements between the parties and
approval by the Government of India.

The proposed 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% interest in each of
Blocks GV-ONN-97/1 onshore northern India 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 ('the Cash
Consideration') 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 and will provide Cairn with
additional funds to progress projects in its core area of South Asia.

In addition, Cairn and ONGC yesterday submitted joint bids for three blocks
onshore Gujarat in the NELP-IV licensing round. If successful, Cairn will retain
a 30% interest in these blocks and ONGC will be operator.

Cairn retains its 50% operated interest in exploration Block KG-OS/6 offshore
eastern India and is currently planning to re-drill prospect 6 on that block. An
active drilling campaign on Block KG-DWN-98/2 is also planned for 2004.


Further information on the Farm-out Interests and the Farm-in Interests is
included in the Appendix to this announcement.


Bill Gammell, Chief Executive, commented:


'We are delighted to extend our relationship with ONGC and to create a strategic
alliance to look at opportunities both within India and elsewhere. The farm-out
of discovered and producing interests is consistent with our strategy of both
creating and realising value from exploration success. This transaction also
significantly augments our onshore acreage position in India '.



Subir Raha, Chairman of ONGC, commented:


'We are delighted to reinforce the equation with Cairn through a strategic
alliance, to add value from opportunities in India and abroad. These
transactions will synergise the competencies of ONGC and Cairn and enhance our
cost efficiencies.'



Enquiries to:


Cairn Energy PLC:

Bill Gammell, Chief Executive                 Tel: [phone]
Kevin Hart, Finance Director                  Tel: [phone]
Mike Watts, Exploration Director              Tel: [phone]

Brunswick Group Limited:
Patrick Handley, Catherine Bertwistle, Mark Antelme     Tel: [phone]

Note to Editors:


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


2.                   'PSC' where referred to in this release means Production
Sharing Contract.


3.         An explanatory map showing the acreage blocks the subject of the
transaction and the NELP-IV bid applications will be made available together
with this announcement on the Company's website at www.cairn-energy.plc.uk as
soon as possible after the release of the announcement.





                                    Appendix


Block KG-DWN-98/2


Cairn currently holds a 100% operated interest in Block KG-DWN-98/2, which was
awarded  pursuant to the first round in India's New Exploration Licensing
Policy. It is a deep water block located in the Krishna-Godavari basin offshore
eastern India in which water depths range from approximately 300 to 3,000
metres.


Cairn signed a PSC for the block in April 2000 following which it conducted an
extensive exploration campaign resulting in several hydrocarbon discoveries
during 2001. During 2002 Cairn completed a detailed subsurface technical review
of the results of the exploration programme with a view to seeking a partner to
optimise plans for future exploration, appraisal and development activity on the
block.


As at 30 June 2003, the carrying value of Block KG-DWN-98/2 on the Cairn balance
sheet was £61.4 million. There are no profits attributable to the asset.


Block CB/OS-2


Cairn signed a PSC for Block CB/OS-2, which is located in the Gulf of Cambay
offshore western India, in June 1998. Cairn currently holds a 75% exploration
interest in the block and is operator for the joint venture, which also includes
TATA Petrodyne Limited ('TATA') (15%) and ONGC (10%).


ONGC has a right to increase its stake by 30% in the event of a commercial
discovery on the block and has exercised this right in respect of the Lakshmi
and Gauri Development Areas. The current equity interests for these development
areas are therefore Cairn 50%, ONGC 40% and TATA 10%.


The Lakshmi gas field commenced production in November 2002 and average
production from the field during the first half of 2003 was 106 million standard
cubic feet of gas per day. Development of the neighbouring satellite Gauri gas
field is currently underway with production expected to commence in the first
half of 2004.


As at 30 June 2003, the carrying value of Block CB/OS-2 on the Cairn balance
sheet was £103.8 million. Operating profits attributable to the asset during the
first half of 2003 were £16.4 million.


Block CB-ONN-2001/1


Block CB-ONN-2001/1 occupies an area of 210 square kilometers in the heart of
the productive Cambay onshore basin and was awarded to ONGC in the NELP-III bid
round. Cairn also bid for this block in NELP-III.  ONGC currently holds a 100%
operated interest in the block.


Block GV-ONN-97/1


Block GV-ONN-97/1 occupies an area of 36,750 square kilometres in the virtually
unexplored Ganga basin adjacent to the large Delhi market. The block was awarded
to ONGC in the NELP-I bid round. ONGC currently holds a 70% operated interest in
the block and Indian Oil Corporation holds a 30% interest.







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