Raj has more oil reserve than thought: Cairn

Cairn Energy has announced that the Indian oil discovery could produce 50pc more oil than forecast.

Cairn Energy has announced that the Indian oil discovery could produce 50pc more oil than forecast. Its chief executive Bill Gammell said that an independent audit of the Rajasthan fields confirmed they could produce 500m barrels of oil. Special drilling could obtain a further 148m barrels.

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The Scottish energy explorer is expected to be a oil producer in India. It said the three fields could produce between 120,000 to 150,000 bpd of oil at their peak, generating $1billion a year in revenue.

Previous estimates said the Mangala, Bhagyam and Aishwariya fields would generate 80,000 to 100,000 bpd. Production is due to begin in late 2007. ABN Amro analyst Finlay Thomson said, "It's becoming quite clear that they have been very conservative. It's looking like there's a lot more oil there than I think the market was assuming in the first place."

With the news Cairn shares surged 52 to £11.52. Currently Cairn extracts gas and oil from the east coast of India in Andhra Pradesh, and gas off the coast of Bangladesh. Development of the Rajasthan field is expected to increase daily production six-fold. "We've gone from fiction to reality," Gammell said. "For the first time in our history we are going to see the future where we will be leverage into the oil price."