Cairn soars on new India strike

FAST-GROWING oil explorer Cairn Energy today revealed its second stunning discovery in a row in India.

Shares in the group raced ahead 112 1/2p or 15% to an all-time high of 836p as Cairn said an exploration well in western India had struck an oilfield with recoverable reserves of up to 80m barrels.

The find comes two months after the Scottish group, run by former rugby international Bill Gammell, found what is believed to be the biggest-ever oil discovery in India - up to 200m barrels. Both finds are in the Rajasthan exploration block, a licence transferred over a number of years to Cairn by oil giant Shell for $20m (£10.5m).

Gammell said: 'In oil and gas terms you never think you have more than a 10% chance of exploration success but when you are drilling in the same area the chances are always higher.'

Cairn's success since the start of the year has transformed its business. Its potential reserve base has quadrupled and its market value has doubled to more than £1bn.

Analysts upped their price targets today and said the supermajors could soon be sniffing round the group, which believes its daily production could treble to 100,000 barrels in the next three years.

Finlay Thompson, oil analyst at ABN Amro, said: 'This is very good news. It's the second discovery in a row, not as big as the first but the whole area now looks very rich in hydrocarbons.

'I'm increasing my target price from 700p to 775p but there's a load of upside from there. The majors will all be interested now but I doubt Shell would have the brass neck to go back in.'

Cairn hopes to drill five or six wells across the Rajasthan block this year. It must agree a plan to bring the finds to commerciality with the Indian government by May next year. Pre-tax profits soared 58% to £69.1m in 2003.

WHEN the phone rings in Bill Gammell's office today to congratulate him on another oil discovery, it could well be Tony Blair, or even George W Bush. The chief executive knows both of them well.

Gammell was in Blair's class at Fettes, the Edinburgh public school known as the Scottish Eton. George W is a family friend who stayed at the Gammell family's farm in Perthshire when he was just 13 years old.

Despite Gammell's reluctance to comment on his links with power, it is an open secret that Bush's first words to Blair after he came to office in 2001 were: 'I believe you know my old friend Bill Gammell.'