REUTERS – Shares in Niko Resources Ltd (NKO.TO) fell as much as 4 percent on reports that India had rejected its partner Reliance Industries Inc’s (RELI.NS) plan to recover $1.2 billion in costs at the KG D6 block.
The company that explores oil and gas in southeast Asia and the Caribbean co-owns the KG D6 block with BP Plc (BP.L) and RIL.
“The reason why the stock would be down is the issues in India. Reliance has been slapped with a $1.25 billion bill with regards to D6. As it affects Reliance, it affects Niko as well,” UBS Securities analyst George Toriola told Reuters on phone.
According to a newspaper report, the petroleum ministry disallowed cost recovery from the KG D6 gas field citing Reliance’s failure to meet drilling commitments and blamed the company for violating production-sharing contract obligations.
Under India’s exploration policy, the government allows companies to first recover their cost from oil and gas revenue, and subsequently share profits with the government.
Niko has a 10 percent stake in the D6 block, which is estimated to hold more than 9 trillion cubic feet of gas. Production from the D1 and D3 fields has been declining for a year.
Shares of Calgary, Alberta-based Niko were trading down 4 percent at C$41.21 on Friday. They touched a low of C$41.15 earlier in the day on the Toronto Stock Exchange.
(Reporting by Maneesha Tiwari in Bangalore; Editing by Roshni Menon)