When Woodside agreed to pay $US430 million ($A560 million) to buy out ConocoPhillips it estimated the field contained around 560 million barrels, a figure that tallies with the independent report prepared for FAR (15%) by RISC of 561MMbbl (2C) in the wake of the SNE-2 and SNE-3 wells.

While FAR talks of an upgrade towards 1Bbbl (3C) once the results of the successful BEL-1 and SNE-4 appraisal wells have been fully assessed, Cairn has been more cautious, previously bandying about a 2C resource of 385MMbbl to date.

Cairn's 1C estimate is now 274MMbbl and its 3C is in excess of 900Mmbbl, close to FAR's 277MMbbl (1C) and 1.07Bbbl (3C).

The increase of around 30% follows the work FAR has done to help support its capital raisings, and follows drilling that extended the field to the east.

Cairn says oil-in-place for the field exceeds 2.7Bbl, and that there is exploration potential for a further 500 MMbbl.

Drilling

"Drilling is scheduled to re-commence in Senegal shortly, benefiting from lower costs across the sector," Cairn Energy's CEO Simon Thomson said in a statement overnight.

"The program contains options for multiple wells and in addition to ongoing appraisal of the SNE field, the joint venture continues to assess optimal locations for further exploration drilling on the acreage."

The third phase of exploration and appraisal drilling is set to begin in fourth quarter or early 2017 with two firm at a cost of $80 million and several contingent wells on one-slot options, with a range of semi-submersible and drill ships being assessed.

The aim will be to focus will be on deliverability of so far untested reservoir units and better define the connectivity of upper reservoir units over development well testing.

Cairn exploration director Richard Heaton said there was some evidence that the upper reservoir in the field is not quite as good as in the lower reservoirs, and he stressed that Cairn is still at the very early stages of what is a large field, covering 350sq.km.

More than 600m of core has been recovered and is being studied, and integrated with well and seismic data, and Heaton stressed the numbers could change as the JV gets a better handle on the field.

Development

Work to date is considering a floating production, storage and offloading vessel with to a plateau rate of between 100,000 and 120,000bopd with tiebacks to 15-20 production wells, with first oil expected to be delivered as early as 2021.

Cairn is currently the operator with a 40% interest, but once the exploration phase ends ConocoPhillips can exercise its right to operatorship, a claim that will be transferred to Woodside if the purchase of the US oiler's 35% share goes ahead.

Cairn's early numbers suggested a development costs for SNE of around $20/bbl based on analogue fields and similar water depths for FPSO developments, but it now believes that all-in figure can come in at less than $15/bbl all-in development based on its experience of drilling five wells to date.

Most of the costs are in development drilling and subsea installation, assuming a leased FPSO, which has typically been Woodside's favoured option on the North West Shelf.

Operating costs are assumed to be $8-10/bbl

In part SNE is aided by the fact that while nominally a deepwater development, the operating environment, the geological characteristics and the fiscal terms altogether combine to mean that it actually ranks above many shallow water or shallower water development projects and even some onshore ones in terms of its economic attractiveness.

The reservoir is better than perhaps one would normally predict considering the age of rocks and flow rates are among the best in West Africa's margin, Heaton said.

Exploration

Cairn has also started talking about a return to exploration drilling, with the Sirius prospect on the shelf, it's just to the north of SNE, it is at the same reservoir levels. It is low risk and contains 80MMbbl of potential.

Heaton gives it as 67% chance of success and described it has an attractive tie-in prospect.

The second is a 150MMbbl prospect to the south. While the FAN-1 well encountered 500m of oil column the reservoir was deeply buried and higher risks, but there is a lookalike stratigraphic prospect that is shallower.

Loss

Elsewhere, the big UK oiler managed to slash its losses for the first half of the year, turning a $230.3 million loss reported in the first half of last year into a loss of a mere $$37.8 million.

In addition the two North Sea projects in which Cairn holds a stake remain on track and under budget.

Cairn said the Kraken project, which is operated by Enquest, is 10% under budget after a drive to reduce costs, while Premier Oil's Catcher project is 20% below budget, all thanks to lower service company costs.

Both projects are set to begin flowing oil in 2017 with costs of $US17/bbl and Cairn said it was fully funded until the increased production brings fresh revenue into the company.

India

Cairn has also initiated an international arbitration to seek $5.6 billion in compensation from the Indian government in case a retrospective tax demand is not quashed.

The tax demand dates back to a restructure in 2006 with the IPO of its Indian unit, and a retrospective amendment to Indian tax law introduced in 2012.

Cairn has asked the arbitration panel either to order India to withdraw its "unlawful" tax demand and compensate Cairn for the seizure of the Cairn India shares, which cost it $1 billion.

Cairn has since reduced its stake in Cairn India to 9.8% by selling out to Vedanta Resources, and says its value is $475.2 million, which would be the limit of the amount the Indian government could claim, although it is confident that it will be successful in arbitration.

Hearings are expected early next year.