Millennium Post

Canada’s Niko to sell stake in RIL KG-D6 block

Stung by lower-than-expected hike in natural gas prices, Canada’s Niko Resources has put up for sale its stake in Reliance Industries’ KG-D6 gas block saying there is uncertainty over long-term price outlook in India.

Niko holds 10 per cent stake in the KG-D6 block where a total of 20 oil and gas discoveries had been made and three out of them are in production.

The government had in October announced raising natural gas price to $5.61 per million British thermal unit from $4.2. 

The increase was lower than $8.4 that the industry was expecting and prevailing $5.71 rate applicable to gas from western offshore fields. “The announced price for the period from November 2014 to March 2015 is a 33 per cent increase over the price received previously, but is lower than expected. In addition, there is uncertainty around the long-term natural gas price outlook in India,” said Kevin J. Clarke, Chairman and interim Chief Executive Officer, Niko Resources Ltd. 

Announcing financial results for quarter ended December 31, 2014, he said as a result the company has engaged Jefferies as its financial advisor to look for a buyer for KG-D6 stake.  “Marketing efforts are underway for the potential sale of the company’s interest in the D6 Block in India along with other assets of the company and/or the entire company,” he said. 

RIL is the operator of the block with 60 per cent interest while the remaining 30 per cent is with 
BP plc of UK. The partners have first right of refusal over the stake and it remains to be seen if RIL will exercise that right. Niko also holds a 10 per cent interest in gas discovery block NEC-25, off the Odisha coast, with RIL and BP.

While the higher gas price is applicable uniformly across fields, Dhirubhai-1 and 3 (D1&D3) gas fields in KG-D6 block will continue to get the old rate of $4.2 till it is settled through arbitration if the output falling by over 80 per cent to about 8 million standard cubic meters per day was due to natural reasons or was a deliberate ploy. 
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