Cairn Energy strikes gas in India

OIL AND gas group Cairn Energy today said it had struck gas in India. Cairn, whose share price has undergone a rapid slide from last year's high, said it had made a new gas discovery in a well at Raageshwari in the southern part of the Rajasthan basin, where it already drills for gas.

The group said the find was positive, both for establishing larger gas volumes at Raageshwari and for future exploration elsewhere in the southern part of the basin. It said it would investigate the find further after securing the necessary approvals from the Indian authorities.

Cairn will be hoping the news will spark a recovery in its share price after recent losses caused by its warning late last of probable tax charges in India and a disappointing appraisal from Rajasthan. Shares were up 33p at 1081p after the announcement but are still down 31% from a November high of 1570p.

After oil finds in Rajasthan in north-west India early last year, the firm had seen a spectacular rise in its share price that lifted it into the FTSE 100 Index.

A spokesman said the company's decision to carry out further investigations showed it believed there was enough gas in the well to justify further exploration. But he added: 'It's still too early to say what the extent of it is.'

Chief executive Bill Gammell described the group's initial evaluation of the discovery as encouraging. 'Further evaluation and appraisal work will be required before understanding its full significance,' he said.

Cairn also said it had won permission from the Indian government to look for oil and gas in a 856 sq km extension of its existing exploration area in Rajasthan.

Mr Gammell set up the company in the 1980s and has successfully switched its focus to south Asia from interests in the US and Europe. It operates in Bangladesh and Nepal as well as India.