Niko can increase stake in 3 RIL blocks

A day after Reliance Industries Ltd announced sale of 30 per cent interest in its 23 oil and gas blocks, Canada-based Niko Resources, RIL's partner in three fields - D6, NEC 25 and D4 - on Tuesday said it has the option to increase its stake in the fields by up to 30 per cent from current working percentages.

This implies that Niko Resources will be able to increase its 10 per cent stake in the Krishna Godavari basin, off the east coast, to 13 per cent; its 15 per cent stake in D4 to 19.5 per cent and 10 per cent stake in NEC 25 in Mahanadi offshore basin, off the Orissa coast, to 13 per cent.

Niko Resource's CEO Edward S Sampson said in a statement: "Niko will be reviewing this opportunity over the coming weeks. The new relationship with additional deep water expertise of BP and Reliance as operator is viewed very positively by Niko."

An RIL spokesperson in a press statement confirmed the same.

An ex-directorate general of hydrocarbons (DGH) official, however, said Niko can increase its stake only if RIL agrees to it and offers the same.

"All the consortium members will have to re-distribute the shares and seek government approval."

It could not be ascertained whether UK's Hardy Oil, RIL's 10 per cent partner in KG-D9, in the vicinity of its prolific KG-D6 gas field, will also have the option of increasing its stake in these blocks.

RIL holds 90 per cent stake in the block. Hardy also holds a 10 per cent stake in AS17 in the Upper Assam Basin. RIL holds the remaining 90 per cent in the block.

Last October, Sampson had said the D4 block, to the south of D6 from where RIL is currently producing, could have gas reserves twice the size of D6.

In a presentation to analysts in Canada, Sampson had said: "It would change India. I feel it's twice the size of D6. We feel we have got prospectivity of up to an exceeding potential for 100 trillion cubic feet (Tcf) gas."

RIL, which had an estimated 40 tcf of gas in KG D6, has recoverable reserves of 11.5 tcf, the largest deep water gas find in India so far.

Earlier this month, Niko Resources' Chief Financial Officer Murray Hesje had said he did not know what was causing the delay in the budgeting process at Reliance.

Hesje had said the project ends 2010 with the same 18 wells tied in and producing as much as at the start of the year, although output was down due to natural decline. A total of 39 wells were expected to eventually be drilled at D6.

RIL, in its third quarter results, said natural gas output from the the KG-D6 field averaged 54.5 million standard cubic meters (mscmd) a day in the quarter ended December 31 - down from 60 mscmd in the April-June quarter.

The company is seeking help from US oil major Shell International to rectify technical glitches in KG D6 block.

Following the deal with BP, the RIL scrip closed at Rs 985.05, up 98 per cent.