Difficult to tell with out looking at the car, pics would be a start!

Sounds like head gasket (or could be turbo if its a water cooled one?)

Just because the engines forged does not mean you cant blow it up!

Is the header tank pressurising, is there white sludge on the oil filler cap, is there an oily film in the header tank or does the water smell of oil?

Try and trace where the oils coming exactly from, if its the turbo then you should quite easily see oil dripping from the braided oil pipe.

First thoughts tho are head gasket mate, Easy job tho, can be done in a weekend.

New gaskets, valve stem oil seals and stretch bolts should be around £100

Head pressure check and possible light skim around £50.

Get some pics up mate.