The Canadian company, which owns a 10 per cent stake in D6, raised about $300 million first-ranking security over the company's participating interest in the block. For this, it put KG-D6 under mortgage. The company has got the Reserve Bank of India's approval, while the ministry of petroleum and natural gas is yet to give its clearance. "We have already raised close to $300 million from institutional lenders. Niko has got clearance from RBI, but not the government nod. We have gone ahead with the plan, as waiting for government clearance may take a lot of time. However, we are already in the process of repaying this loan," said a senior executive in Niko Resources.
In its annual report for financial year 2015-16 (FY16), the company said projected capital expenditures for future development of these discoveries will likely require additional sources of funding, such as future equity or debt issuances. RIL and its partners BP and Niko plan to develop the four satellite fields of D-2, D-6, D-19 and D-22 in the KG-D6 block. The consortium currently produces natural gas from Dhirubhai-1 and 3 (D1&D3) and oil and gas from MA1 field in the KG-D6 block. The gas output from RIL's KG-D6 asset is around 8 million standard cubic meter (mscm) now. "There is uncertainty whether the company will be able to fund the development of undeveloped discoveries in the D6 Block," the annual report added.
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According to experts, raising money over hydrocarbon assets is a global practice. "Through first-raking security, the particular lender will have the first right to recover the debt. It is an international practice. In India also, GSPC had done this before. However, in the case of KG-D6, lenders may be at risk, as it is unsure what is going to be the future revenue stream," said former ONGC chairman R S Sharma.
Backs RIL
In its annual report, the company has backed RIL on the issue of gas migration from the fields of ONGC in KG-D6 to RIL's fields. "In the company's opinion, the operator of the D6 Block has acted in accordance with the provisions of the D6 PSC, with all wells drilled within the block boundaries as per the development plan approved by the relevant authorities under the PSC… it is more likely than not that the resolution of the above will not result in an outflow of resources embodying economic benefits from the company," the report added.
The Shah panel, in its report released on August 31, had suggested that the government was entitled to claim restitution from RIL for the unjust benefit received through the migration. The panel also agreed with the findings of the report submitted by the US-based consultant DeGolyer and MacNaughton (D&M) in November 2015, which stated that about 11.122 billion cubic metres of natural gas had migrated to RIL's fields from ONGC's idle fields between 2009 and 2013. According to media reports, gas worth about Rs 11,000 crore migrated to RIL fields.
Citing a Deloitte study, the annual report says as of March 31, there is about 265 Bcfe and 406 Bcfe of proved and proved plus probable reserves respectively in the D6 block. "The contractor group of the D6 Block is taking the necessary steps towards development of the R-Cluster, Satellites and MJ discoveries in the D6 Block and the company's oil and gas reserves as on March 31, as evaluated by an independent reserves evaluator, reflect significant undeveloped proved and probable reserves for these fields," Niko said.
For Niko, revenue from natural gas sales in India has dropped from $74,292 last year to $63,555 as on March 31 this year. Revenue from oil and condensate too dropped from $21,225 last year to $8,583 till March 31.