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Reliance, BP pay $36 mn for exit of Niko in KG-D6 block

Reliance, BP pay $36 mn for exit of Niko in KG-D6 block

New Delhi: Reliance Industries and UK's BP plc paid $36 million to get their defaulting Canadian partner Niko Resources to exit from the eastern offshore KG-D6 block.

In a statement, Niko said it has exited from the KG-DWN-98/3 block and its 10 per cent stake has been taken over by Reliance and BP.

The firm was paid $36 million to settle an arbitration it had initiated against Reliance and BP trying to force it out of the block over default in payment.

"An amendment to the production sharing contract for the D6 Block in India has been executed, reflecting the assignment of the 10 per cent interest previously held by the company's indirect subsidiary, Niko (NECO) Ltd to the remaining interest holders in the block, Reliance Industries Ltd and BP Exploration (Alpha) Ltd," the statement said.

Subsequent to this, Reliance's stake in KG-D6 has gone up to 66.67 per cent from the previous 60 per cent and that of BP to 33.33 per cent from 30 per cent.

"Niko NECO had entered into a settlement agreement with Reliance and BPEAL under which it agreed to withdraw from D6 PSC and settle its arbitration case filed under the rules of the London Court of International Arbitration in December 2017 in exchange for a settlement amount of $36 million, subject to adjustment prior to closing," it said.

The settlement agreement is subject to certain conditions precedent including the execution of the amendment to the D6 PSC, it said adding the $36 million will go lenders to settle a part of the debt.

Niko, which defaulted on payment of loans to its lenders, had been unsuccessful in seeking a possible buyer for its 10 per cent stake in Bay of Bengal block KG-D6 or securing financing for its share of the $5 billion R-Cluster, Satellite Cluster and MJ development projects in the block.

This led to the company defaulting in making payments for its share of development cost.

Reliance, being the operator of KG-D6 block, slapped a default notice on Niko soon after. Under the terms of the joint operating agreement (JOA) between the participating interest holders in the KG-D6 production sharing contract (PSC), during the continuance of a default, the defaulting party shall not have a right to its share of revenue (which shall vest in and be the property of the non-defaulting parties who have paid to cover the amount in default).

In addition, if the defaulting party does not cure a default within 60 days of the default notice, the non-defaulting parties have the option to require the defaulting party to withdraw from the KG-D6 PSC and JOA.

Agencies

Agencies

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