New Delhi, Feb. 15 (PTI): Stung by a lower-than-expected hike in natural gas prices, Canada's Niko Resources has put up for sale its stake in Reliance Industries' KG-D6 gas block, saying there is uncertainty over the long-term price outlook in India.
Niko holds a 10 per cent stake in the KG-D6 block where a total of 20 oil and gas discoveries have been made and three out of them are in production.
The government had in October announced a hike in the gas price to $5.61 per million British thermal unit (mBtu) from $4.2mBtu. The increase was lower than the $8.4mBtu that the industry was expecting and the prevailing $5.71mBtu rate applicable to gas from the western offshore fields.
"The announced price for the period from November 2014 to March 2015 is a 33 per cent 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," Kevin J. Clarke, chairman and interim chief executive officer of Niko Resources, said.
He added that the company had engaged Jefferies as its financial adviser to look for a buyer for the KG-D6 stake.
"Marketing efforts are underway for the potential sale of the company's interest in the D6 Block in India along with other assets of the company and/or the entire company," he said.
RIL is the operator of the block with 60 per cent interest. The remaining 30 per cent are with BP plc of the UK.
The partners have the first right of refusal over the stake and it remains to be seen whether RIL will exercise that right.
Niko also holds 10 per cent interest in gas discovery block NEC-25, off the Odisha coast, with RIL and BP.
"Due primarily to the projected impact of the new domestic gas pricing policy for India on the company's future liquidity and significant uncertainty on the future long-term price outlook in India, the company engaged Jefferies LLC as its financial adviser to assist in pursuing strategic alternatives, including the sale of assets of the company, a merger or other business combination, the outright sale of the company, a refinancing of its existing debt with replacement debt, or some combination thereof," Niko said.
