"There was oil discovery at Shell's Guda-II well on July 4," said the official, who did not want to be identified. "The strike, at a depth of 1,800 metres (5,904 feet), was 68 barrels per day."

Shell India's spokeswoman declined to comment on the find, but said: "The whole thing (news report) was completely premature. We are still in the process of drilling."

Spokeswoman Priti Devi, head of Shell India's Public and External Affairs, told Reuters that Shell planned to drill another 1,500 metres at the site. "We expect to have results in the second week of August."

Shell India, a subsidiary of Royal Dutch Shell Group, and Cairn Energy Plc are jointly exploring the 11,108 sq kms onland block, RJ-ON-90/1.

Cairn Energy recently took over as the block operator with 50 percent equity participation in return for paying thefirst $2.1 million for the second exploration well. "In the first well (Guda-I), there were indications of natural gas and traces of oil," the industry official said.

Last month, Cairn said it planned to target additional zones at Guda-II deeper than those penetrated in Guda-I. The two wells are about 1.5 km (one mile) apart.