I'm pretty sure it's going to be a rear main seal leak. The bad news is that you're going to have to pull the transmission to get to it. With 200,000 miles (and a fair bit of rusty hardware underneath) you may find that's not an economical option. There are products that claim to rejuvenate worn seals, though I would be skeptical, but it might well be worth spending a few bucks to try one (acknowledging that it might not be the best thing for the engine in general). Another option is to stuff a shop towel into the gap between the transmission and oil pan, and change it when it gets soaked. Oh, and check your oil regularly. ;-)

 

 

I wouldn't bother with the pan gasket - oil leaks pretty much always travel down, not up, so you can trace the path pretty easily. On many leaks, it's a good idea to clean up the entire area with engine cleaner / degreaser, and then the leak path will be pretty evident.

If you do end up deciding to try a leak stop product, you might do what I do and use the considerable number of reviews on the amazon shopping site to see how various products have worked for others. Naturally, many of the reviews will be bogus (either to boost a product or denigrate it) but it's pretty easy to spot the real DIY'er reviews, and to get a feel for how likely it is that the stuff might actually do something positive.

Here's a link to a quick search I just did...

 

 

Wow - that's hard to imagine. You can build something like that without gaskets if you have a NASA-style budget and engineering, but there's no way the pan should rely on metal-to-metal contact to prevent oil leaks. It looks like the right product is a silicon sealant (based on a quick search for an S40 oil pan "gasket"). I really hope this fixes your (big) leak! I had mistakenly thought that the leak was starting above the pan, but I can see now that it isn't, so I'm thinking you're very likely to fix your leak with some sealant. Surface prep is everything when using silicon to seal an oil pan so take your time and really get the surfaces shiny and clean before applying the goop.

 

Thank you habby. I'm hoping this does it. I did my best to clean everything up before re-assembling. One thing is nagging at me though. There was a very small amount of oil dripping down the inside of the back of the pan which I kept wiping off in prep for re-installation. Thing is, I forgot to give it one was wipe before final assembly and I'm worried that I pressed the two pieces back together with some oil residue present in between. Luckily I used the super expensive Volvo liquid gasket so I'm hoping that whatever magic they pack in there to justify the stupidly expensive cost will be able to cope with a bit of oil...we'll see.

 

well, re-sealing the oil pan didn't do jack s&&t. Leak is back, oh and now the oil cooler is leaking because the overpriced gasket kit for the oil pan of course doesn't include two new seals for the cooler. Love it.
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I'd suggest fixing the seals for the cooler, and then cleaning the entire area. The leak may be coming from somewhere you aren't expecting, and I'd hate to see you spend a whole lot of time trying to fix something that ends up not being a problem...

 

 

You likely have a rear main seal leaking. But, before replacing any seals, make sure that the crankcase system isn't plugged up. If it is, fix that first, then seals.

 

FYI, you can tell this is happening if you take off the oil cap and get a pronounced "whoosh" with the engine running.

 

My method is a bit simpler. With the engine fully warmed up, pull the dipstick up a bit while idling. If you see a stream of gasses coming out the dipstick, the PCV system is plugged.

However, if you remove the cap with it running and you hear a pressure release, you've confirmed what I'm testing for.

 

 

 

If you haven't done so, check the turbo oil lines and gaskets.