Reliance Industries Makes Huge Gas Discovery Offshore India

Reliance Industries Ltd., India's largest private oil refiner, Thursday said it has made a major gas discovery off the eastern Orissa state coast - its second-biggest find in the past two years.

"The initial estimates of the new gas find indicate a volume of about four to five trillion cubic feet," Reliance Chairman Mukesh Ambani told shareholders in Mumbai.

In October 2002, Reliance discovered 14 trillion cubic feet of gas in the Krishna-Godavari basin off India's south eastern coast. The find, one of the largest in India, exceeds the gas output of the country's biggest exploration firm ONGC.

Ambani said production at Reliance's Orissa gas block is likely to start within the current financial year, which ends March 2005.

Reliance's announcement came close on the heels of the Indian Cabinet's approval of a plan by ONGC Videsh Ltd., a unit of ONGC that operates the company's overseas assets, to invest $200 million in an oil pipeline project in Sudan.

Some analysts, however, weren't enthusiastic about Reliance's discovery. "It's not as large as expected, but it will add about 15 rupees ($1=INR45.83) to their earnings per share," said an analyst at a European brokerage.

In a recent report, Credit Lyonnais estimated Reliance's EPS for fiscal 2004-05 at INR43.1 a share, up from INR36.80 last year.

Ambani said Reliance is expected to make substantial investments in oil exploration over the next two years. "Exploration and production have been the main emphasis of Reliance and we'll spend close to 25 billion rupees over the next 24 months," he said.

Reliance also plans to expand its petrochemical capacity by 21% to 15 million metric tons in three years, said Ambani. "As Reliance completes exploration efforts, we can expect more internal synergies between feedstocks and petrochemical manufacturing," he said.