Niko expects new plan to help double KG-D6 reserves

Niko Resources, the Canadian partner of Reliance Industries in the Krishna-Godavari D6 block, expects reserves from the block to more than double later this year when development plans are approved for the existing discoveries.

“Reservoir performance at our two producing gasfields in the D6 block has given the company a significant write down and this is reflected in our financial statements. On the positive side, at D6 alone, reserves are expected to more than double later this year when development plans are approved for existing discoveries,” the report said.

The company, which reported a loss for the fourth quarter of fiscal year 2011-12, has recognised a $133 million impairment on its due to the fall in output from the D6 block, it said in its annual report.

[caption id=“attachment_362669” align=“alignleft” width=“380” caption=“Niko Resources expects reserves in the Krishna-Godavari D6 block to more than double later this year. Reuters”] [/caption]

The output from the block in the Krishna-Godavari Basin has been on the decline and hit a low of 31.33 million metric standard cubic metres per day (mmscmd) as against a projected 80 mmscmd.

Reliance Industries (RIL), the majority stakeholder in the block, has been drawing flak for the fall in the output. RIL holds a 60 percent stake in the block, BP plc holds 30 percent and Niko Resources 10 percent.

Earlier this month, Niko had said the total proved and probable gas reserves at the D6 block had fallen to 1.93 trillion cubic feet (tcf), as against the earlier estimate of more than 9 trillion cubic feet.

“Despite sharp reserve scale down, Niko sounds very optimistic,” Nomura said in a research report.

“It expects KG-D6 reserves alone to more than double later this year when development plans are approved for existing discoveries. Including 0.35 tcf of production this year, this implies adding at least 2.2tcf of 2P (proved+probable) gas reserves, in our estimates,” it said.

The brokerage also assumes that of the expected 260 percent increase in reserves for Niko this year, 80 percent will be from India. The Canadian firm has earmarked $50 million for development of the D6 block this financial year.

A recent report in The Economic Times had said the country’s largest private conglomerate, along with its partners, would pump in $4 billion to develop satellite fields of D6 block.

An integrated development plan is expected to be submitted by the end of the current financial year, a Niko Resources executive was quoted as saying in the report. Developing the satellite fields was part of the integrated development plan.