Indians eye Cairn Energy's oil fields in Rajasthan

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Cairn Energy's oil interests in the Rajasthan area of India are being eyed up by the country's state-owned oil company, in a move which could lead to a break-up of the independent exploration group.

News of the potential bid from India's state-owned Oil and Natural Gas Corporation sent Cairn shares sharply higher, although they fell back to close only 2 per cent up at 2000p, valuing the company at £3.6bn.

Cairn's massive discoveries in Rajasthan, which contain an estimated 2.5 billion barrels of oil, have prompted a spectacular rise in the value of the company in the last two years with the share price increasing six-fold.

The company estimates that recoverable reserves in Rajasthan are between 500 and 700 million barrels - enough to more than double its current production in South Asia to 250,000 barrels a day.

Commenting on the sidelines of an energy conference in New Delhi, the ONGC chairman Subir Raha said the Cairn assets were "one of the opportunities we are looking at".

The Indians are reported to have offered Cairn between $1bn (£570m) and $2.5bn for the assets - some $1bn less than most analysts calculate they are worth.

A Cairn spokesman refused to comment on the remarks, saying only: "We have a world class field in Rajasthan and are getting on with our development plan." Cairn will update the market on its prospects in Rajasthan when it produces annual results a week on Tuesday.