The company was founded in 1981 by Sir Bill Gammell, the former international Rugby player, who remains its CEO, his father James (Jimmy), his brother Pete and others. Its initial operations were in the USA and, following its listing on the London Stock Exchange in 1988, it expanded into the UK North Sea and internationally (Papua New Guinea, Spain, Vietnam, China and Australia). Cairn acquired Conoco's UK onshore acreage in 1988 and became one of the largest operators of UK onshore oil production with the Palmers Wood oil field just south of London, near Junction 6 of the M25,[5] Humbly Grove (near Basingstoke) and others.

Cairn's expansion started with a substantial (non-operated) gas discovery (East Cameron 331) in the Gulf of Mexico in 1993 followed by another large gas discovery at Sangu, offshore Bangladesh near Chittagong, in 1996.[6] In parallel, Cairn launched a series of takeovers of public listed companies – Teredo Petroleum in 1994,[7] Holland Sea Search NV in 1995[8] and Command Petroleum in 1996.[9]

In 1996, Cairn farmed out a 25% interest in the Sangu field to Halliburton in return for Halliburton bearing a 50% share of the development costs.[10] In 1997, it sold half of all its Bangladeshi interests to Royal Dutch Shell in return for Shell assuming a $330 million carry of Cairn's exploration and development costs.[11] This agreement gave Cairn an interest in Shell's huge acreage position in Rajasthan onshore in North West India. Cairn drilled two unsuccessful exploration wells and Shell then sold its 50% share to Cairn for $7.5 million: Cairn's third well, now 100% owned, found the Mangala oil field.[12]

In December 2010, Cairn agreed to sell a stake of 58.5% of Cairn India, its Indian focused subsidiary, to Vedanta Resources for $8.67 billion.[13] Talks between the two companies started in August 2010. [14] However, approval did not come from the Indian government until September 2011 and the deal had to be restructured.[15]

The company sold additional 3.5 per cent of its shares in its Cairn India for about USD 360 million in June 2012.[16]