Cairn strikes an extension in India

OIL and gas explorer Cairn Energy today said India's government had approved an 18 month extension of an exploration licence for an area in the north and west of Rajasthan.

The news sent shares in Cairn, a star stock market performer in recent years, up 22p to 1,322p by midday.

Cairn said the appraisal area covers 2,884 square kilometres and incorporates the Bhagyam and Shakti oil fields as well as several structures requiring appraisal. It said one such structure had been successfully tested by the N-I-2 well which lies between the Bhagyam and Mangala fields.

Cairn said discussions with the Indian government were continuing regarding an application for an extension of the southern area of the Rajasthan block.

In April, Cairn said production from its key oil assets in India would be better than expected. The announcement overshadowed a sharp fall in 2004 profits.

However, most of Cairn's value is based on its Indian Rajasthan assets hence investors focus more on those assets rather than on day-to-day profitability.

Cairn's shares soared 300% last year, giving it brief entry into the FTSE 100, on the back of its massive oil finds in Rajasthan.