Canada-based Niko Resources has said it expects to increase its stake by 30 per cent in each, or all the three oil blocks it has with Reliance Industries Ltd in India. The company plans to exercise its pre-emptive rights in the blocks, including the prolific D6 block.
The company’s right has been triggered with RIL announcing its intention to sell 30 per cent interest in the blocks to BP Plc earlier this year. The RIL-BP deal is currently awaiting government clearance.
In its annual report to the shareholders, Niko said, “During financial year 2011-12, due to a pre-emptive right, Niko expects to have the opportunity to increase its net interest by 30 per cent in each or all the D6, NEC-25 and D4 blocks in India. Niko expects this opportunity would be financed with debt.”
The Canadian company is, however, not optimistic about increase in gas production from D6, that has been stagnating at 48 million standard cubic metre a day (mscmd). Production from the D6 block is expected to decline until additional wells are drilled and tied-in, said the RIL partner, which currently has 10 per cent interest in the D6 block.
While forecasting a total production of 236 million cubic feet a day (MMcf/d) production in 2011-12, the company said it had assumed “that no additional wells will be tied in at D6 during the year and is consistent with the estimated production from total proved reserves in the company’s reserve report”.
Production from the D6 block has increased year-over-year and is the primary reason for total production increases of 25 per cent compared to production in the prior year. The block is also the primary reason for improved operating netbacks as it has higher realised prices and lower profit petroleum than the average of the company’s other properties.
Gas sales volumes from the block for the year averaged approximately 198 mMcf/d versus a budget of 210 mMcf/d due to well performance. Current gas sales volumes from the block are approximately 167 mMcf/d. The company has a 10 per cent working interest in the 7,645-sq km D6 block. It comprised 79 per cent of the company’s oil and gas revenue during the year.
