Niko Expects Indian Gas Pricing Scenario to Improve
Niko Resources has said that the business environment in India appears to have improved significantly as evidenced by the release of a government-appointed committee’s report on domestic gas pricing and the restart of planned development and exploration activities for the D6 Block in India.
In December last year, the Rangarajan Committee provided its report to the Government of India (GOI) that included a recommendation on a pricing mechanism for natural gas produced in India and this recommendation is currently being reviewed by the Government for approval.
“Based on current inputs into the pricing formula, the price for natural gas sales from the company’s assets in India would increase to approximately $8 - $8.50/MMBtu, compared to $4.20/MMBtu for current natural gas sales from the D6 Block,” Niko said in a report elaborating its performance during the quarter that ended on December 31.
Niko has a 10 percent working interest in D6 block, with Reliance Industries Limited, the operator, holding a 60 percent interest and BP holding the remaining 30 percent interest.
The field development plan for an additional development area in the D6 Block was submitted in January 2013. “With field development plans submitted and increased clarity on future gas prices for the developments, the company expects to book a substantial portion of its approximately 600 bcf of estimated contingent resources as reserves, effective March 31, 2013,” the report said.
The company’s exploration program has identified three additional areas in the D6 Block for potential future development. In January 2013, the G2 well on the D19 discovery, one of four satellite discoveries approved for development by the GOI, was successfully drilled and the development plan for the R-Series area was submitted to the GOI for approval.
The development of these areas is expected to be completed within four years after the approval of the development plans. The plans are likely to include the re-entry and completion of certain existing wells and the drilling of new wells, all connected with new flow-lines and other facilities into existing D6 Block infrastructure.