Sunday Express: All’s well with Cairn in the Indian desert: It was an act of stupidity... You don't sell off your golden eggs like that. Shell's loss is Cairn's gain.”: "Oil minnow’s £4m field is worth billions" (ShellNews.net)

Oil minnow’s £4m field is worth billions, writes Robin Pagnamenta

15 August 2004

THE contrast between the fortunes of Shell and oil minnow Cairn Energy could not be starker. While Shell has been battling to soothe investor concerns about governance and its long-term supplies of oil and gas, Cairn has been moving from strength to strength.

Shares in the Edinburgh-based exploration company have soared since January when it revealed its 5,000 sq km field in India's Rajasthan desert contained a major oil prospect.

Last week investors were delighted by another well discovery there — the fourth in two years. Analysts suggest the company could find as much as 1 billion barrels of recoverable oil there. "Cairn is going great guns," says Richard Slape, oil analyst at Seymour Pierce. "The company was surprised by what it has achieved".

Cairn has a busy winter ahead, drilling the wells in Rajastfaan before a licence expires next May.

"It would be a surprise if it didn't make more discoveries in the next few months," says Slape.

With its market cap bulging at £2.2 billion, Cairn looks set to enter the FTSE 100 Index this September.

It has been quite a ride for chief executive Bill Gammell, the ex-Scottish rugby union international who is also a personal friend of both Prime Minister Tony Blair and US President George W Bush.

Ironically, Cairn acquired the Rajasthan site from Shell for just £4 million in 2002.

One oil analyst said: "Most people think the fact Shell sold those fields shows there is something inherently wrong with what it is doing on the upstream end of its business. It was an act of stupidity... You don't sell off your golden eggs like that"

Shell's loss is Cairn's gain.

Last week the company, which also has interests offshore in the North Sea as well as India's Gojarat province and Bangladesh, announced it was also training its sights on Nepal. Cairn has signed an agreement with the Nepalese Government to explore five exploration blocks on the border with India.

"We believe Nepal has many of the fundamental geological elements required for future exploration success and we look forward to commencing operations" said Gammell.

Shares in Cairn closed at 1489p on Friday, up 1.4 per cent from Thursday.

With global oil prices also gushing ever higher, the future for Cairn looks about as good as it gets.