Mumbai, (IANS) The Reliance Industries (RIL)-led consortium partner in the eastern offshore KG-D6 block, Niko Resources of Canada, on Monday said it may defer development of the R-Cluster and other satellite gas fields if the gas price outlook remains uncertain.
The consortium, that includes British major BP, has made 19 oil and gas discoveries in the KG-DWN-98/3 block in the offshore Krishna-Godavari basin, while only three gas fields have been brought to production.
Development plans for five other discoveries have been approved.
“The development of these discoveries is dependent on the future economic viability of the required investments,” Niko said in its Annual Information Form for 2014-15.
Development was “dependent on the future long-term price outlook for gas sales from these projects and the significant uncertainty in this outlook could mean that the development of these reserves could be deferred,” it said.
In October last, the Indian government approved a new domestic gas price of $5.61 per unit on net calorific value (NCV) for the period November 1, 2014 to March 31, 2015.
This was compared to earlier gas price of $4.2 per unit on NCV basis.
While the new price, Niko said, was “significantly lower than anticipated,” the rate for April 1, 2015 to September 30, 2015 was even lower at $5.18 on NCV.
RIL is the operator of the KG-D6 block with 60 percent interest, Niko has 10 percent, while BP has the remaining 30 percent.
Earlier this month, Niko Resources announced it has extended by over three months its search for a buyer of its stake in the KG-D6 gas block to pay off debt.
“The board of directors of Niko now believes that it requires more time to determine if the sales process will be successful or, if not, to develop an alternative plan with the assistance of its advisors and stakeholders to achieve the best results for the stakeholders of the company,” Niko said in a filing to the Toronto Stock Exchange.
It said it has reached an understanding with lenders to extend the search till September 15.
Niko had in February announced it intended to sell-off its 10 percent stake in the KG-D6 block to square a $340 million debt. The company had earlier planned to sell off the interest by April 30 but later extended it till May 31.
It had earlier blamed a lower-than-expected gas price announced by the Indian government for its decision to sell its stake.
“The announced price for the period from November 2014 to March 2015 is a 33 percent 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,” its chairman Kevin J. Clarke had said.