Don't believe the Interlink 'oil discovery' hype

Vol 14, PW 10 (04 Nov 10) Exploration & Production

Interlink Petroleum shares are selling like hot cakes on the Mumbai Stock Exchange but oil ministry officials are advising investors to stay cool.

Driving activity around the tiny Delhi-based company’s stock is a statement to the BSE on October 21 detailing an “oil discovery” at well Baola-8 in the 4-sq km Baola field. Five days later Interlink’s share price hit a peak of Rs101.95 ($2.2) marking a 377% increase from its low of Rs27 ($0.60) last December.

“Just because Interlink has found some oil,” says a sceptical oil ministry source, “that doesn’t mean it can be produced commercially.” On October 23, Interlink released Dewanchand Ramsaran’s 1100-hp land rig DR-10 from Baola after drilling and testing well Baola-8 – a week later than expected.

In its BSE statement Interlink says Baola-8 was spud on August 28 and drilled to 1009-metres TD. But originally Interlink had planned to drill to 1350-metres TD.

Interlink also said it encountered the ‘Middle Eocene Oolite’ reservoir section of the ‘Kalol formation’ from 904.5 to 928 metres. “Preliminary analyses indicate the specific gravity of the oil is approximately 12 degrees API,” reads the statement.

But as everyone knows, says an oil ministry source, “anything below 15-degree API is ‘heavy’ oil and difficult to produce commercially.” No one, however, doubts Interlink’s claim that oil flowed to surface during testing of two of the five zones encountered in the presence of DGH geologist Rupesh Kumar and DGH petro-physicist Ajay Kumar.

“Oil of 12-degree API can flow to surface during a test,” he admits. “But getting oil to surface during a test is one thing,” we hear.

“Producing it commercially is quite another.” Interlink’s stock exchange statement gives no details about ‘flow rates’.

When contacted, Interlink tells us, “a ‘discovery notice’ with all details has been sent to the DGH.”