RIL strikes black gold in Cambay

Reliance Industries, the nation's biggest which did not bid for exploratory blocks this year in India, on Tuesday announced the first discovery of oil in the Cambay basin, which if proven will add significantly to its hydrocorbon reserves. "Reservoir thickness of 15 metres was found. The well flowed at the rate of 500 barrels of oil per day. This discovery is expected to open the future potential within the block," said RIL in a statement. This discovery is RIL's second major oil find after the offshore MA field in the Krishna Godavari (KG) basin off India's east coast, where it is producing around 11,000 barrels of oil per day. RIL's gas reserve is estimated around 11 trillion cubic feet which translates into daily production of 550,000 barrels of oil and its equivalent a day at peak production. RIL hit the black gold in the fifth well of on-land block CB-ONN 2003/1 in the basin and is assessing the commercial viability of the discovery by gathering more data and analysis. If found commercially viable, this discovery may help increase domestic fuel supplies in this energy starved nation which imports more than tow-thirds of its consumption. RIL shares rose as much as 3.72% to a day's high of Rs 2,100 on Tuesday, before erasing gains on profit booking to end up Rs 28.05 or 1.39% at Rs 2052.60. RIL stock has gained 12.74% in the past one week but is 2.26% lower in the past one month. Although analysts say it may be a significant discovery, it may be too early to think of upgrading earnings based on the available data. "It would be premature to comment on the discovery,'' Sanjeev Prasad of Kotak Securities told ``The commerciality of the find is not yet known. The company has not given any figures on the resource potential of the block. So the earnings estimates remain unchanged." Kotak has a ``Sell' rating on the stock with price target of Rs 1750. RIL has christened the discovery as 'Dhirubhai 43' after the name of its founder late Dhirubhai Ambani and because it is the 43rd oil discovery by the firm in India. The company has notified the discovery to the Indian government and the Directorate General of Hydrocarbons, the deemed upstream regulator. RIL holds 100% participating interest in the block in the Cambay basin, which was awarded under fifth round of the New Exploration Licensing Policy (NELP) bidding in 2005. Four more wells are expected to be drilled in the block with an area of over 635 square kilometres. Last month, RIL surrendered 14 blocks back to the government after incurring an expenditure of Rs 1,400 crore in unsuccessful exploration, leaving it with 31 blocks in India. Reliance had previously found crude oil reserves in the predominately gas-rich KG D-6 block off the east coast. The MA field, which came into production in September last year, is currently producing around 11,000 barrels per day. "Cambay oil discovery will boost RIL's hopes in the oil and gas business and will help offset some of the weakness in the refining sector. It will also help ease some of the worries over uncertainty surrounding a gas-pricing dispute," said an analyst with international brokerage firm. Early this year, RIL commenced gas production from its KG D6 field off eastern India, which is among the five largest deepwater gas projects in the world. Reliance also operates 14 oil blocks globally