RIL, BP take over Niko’s stake in KG-D6

RELIANCE AND BP

HAVE TAKEN OVER

NIKO’S 10% STAKE IN

THE KG-D6 BLOCK AFTER THE CANADIAN FIRM DEFAULTED ON ITS DUES

NEW DELHI: Reliance Industries Ltd (RIL) and UK’S BP plc have taken over the 10% shareholding of their partner Niko Resources in the eastern offshore KG-D6 block after the Canadian firm defaulted on paying for its share of gas field development cost.

People with knowledge of the development said the oil minister has given ‘unconditional’ nod to Reliance and BP for taking over 10% interest of Niko in KG-DWN-98/3 or KG-D6 block in the Bay of Bengal.

Reliance and BP split Niko’s share in proportion to their existing shareholding in the block.

Subsequent to this, Reliance’s stake in KG-D6 has gone up to 66.67% from 60% previously, and that of BP to 33.33% from 30%, the people said.

Emails sent to Reliance and BP for comments remained unanswered.

Niko, which defaulted on payment of loans to its lenders, has been unsuccessful in seeking a possible buyer for its 10% stake in Bay of Bengal block KG-D6 or securing financing for its share of the $5 billion R-cluster, Satellite Cluster and MJ development projects in the block.

This l ed t o t he c ompany defaulting in making payments for its share of development cost in early October 2018.

Reliance, being the operator of KG-D6 block, slapped a default notice on Niko soon after, people familiar with the matter said.

Under the terms of the joint operating agreement (JOA) between the participating interest holders in the KG-D6 production sharing contract (PSC), during the continuance of a default, the defaulting party shall not have a right to its share of revenue (which shall vest in and be the property of the non-defaulting parties who have paid to cover the amount in default).

In addition, if the defaulting party does not cure a default within 60 days of the default notice, the non-defaulting parties have the option to require the defaulting party to withdraw from the KG-D6 PSC and JOA.

In December 2018, Reliance and BP sent Niko a notice asking it to withdraw from KG-D6. Parallelly, they approached the sector regulator the directorate general of hydrocarbons (DGH) and the oil ministry for approval to take over Niko’s share.

People familiar with the matter said to stall the takeover, Niko filed a notice of arbitration challenging the withdrawal notice but this did not deter the ministry from giving an unconditional approval to Reliance and BP to take over its share.

Niko had previously withdrawn from eastern offshore NEC- 2 5 b l o c k d ue t o c a s h crunch.