Mumbai: Energy major Reliance Industries has made its first oil find in a western India block, boosting hopes the firm’s oil and gas exploration business will help offset some of the weakness in the refining sector.
The company, India’s biggest conglomerate with interests in petrochemicals, refining, oil and gas exploration, and retail, said it made the discovery in its onland exploratory block in the Cambay basin in Gujarat state.
Five wells had been drilled in the area, and the fifth well flowed at a rate of 500 barrels of oil per day (bopd), the company said on Tuesday.
“This discovery is expected to open future potential within the block,” Reliance said in a statement.
The news boosted shares in Reliance, which has a market value of $71 billion, as much as 3.7%. By 0813 GMT, Reliance was trading up 0.1% at Rs2,027.35, in a weak Mumbai market that slid 0.4%.
“Overall, the company has had a very high strike rate,” said Maulik Patel, an oil and gas analyst at K.R. Choksey Shares and Securities. “Much more than some competitors.”
“This shows the company’s exploration and production division is doing well,” Patel, who has a “hold” rating on Reliance’s stock, said.
The company in April started pumping gas from its block in the vast Krishna Godavari (KG) basin off India’s east coast, where it made the country’s largest gas find. This is expected to nearly double India’s gas output when production peaks at 80 million standard cubic metres a day (mmscmd).
Gas production has helped partly offset weakness in the company’s refining business, where margins have been slashed by a sluggish global economy and which led to a fourth straight fall in quarterly profit.
Analysts say Reliance, which owns the world’s largest refining complex, might look to concentrate more on its oil and gas exploration and production businesses as it seeks to mitigate weak demand for its refining products.
The company, controlled by billionaire Mukesh Ambani, is also embroiled in a high-profile legal battle over a deal to sell gas to Reliance Natural Resources, led by Ambani’s estranged younger brother Anil, at below the price set by the government.
The latest oil discovery adds to hopes that success in the firm’s exploration and production business will help allay some of the worries related to the company’s outlook due to the refining-margin weakness and the gas dispute.
Reliance holds a 100% participating interest in the Cambay basin block, which covers an area of 635 square kilometres.
The block was awarded to Reliance under the fifth round of the Indian government’s auctions of oil and gas exploratory blocks.
Reliance also produces oil from its D6 block in the KG basin, and holds a stake in the Panna, Mukta and Tapti oil and gas fields off India’s west coast.