Welcome!

News Feed Item

RIL, BP and Niko Issue Notice of Arbitration to Government of India

Seek implementation of "Domestic Natural Gas Pricing Guideline 2014" notified on January 10, 2014.

CALGARY, ALBERTA -- (Marketwired) -- 05/12/14 -- Niko Resources Ltd. ("Niko" or the "Company") (TSX: NKO), provides the following update.

Notice of Arbitration

RIL, BP and Niko, the contractor group of the D6 block in India, have issued a notice of arbitration on May 9, 2014 to the Government of India seeking the implementation of the "Domestic Natural Gas Pricing Guideline 2014" notified on January 10, 2014.

The continuing delay on part of the Government of India in notifying the price in accordance with the approved formula for the gas to be sold has left the parties with no other option but to pursue this course of action. Without this clarity, the parties are unable to sanction planned investments of close to $4 billion this year. In addition, this will also delay the ability of the parties to appraise and develop other significant discoveries made last year. Overall, the parties were planning to invest $8-10 billion in the next few years to significantly increase production from the D6 block. This domestic production is essential for meeting India's energy needs and will also help conserve foreign exchange which is required for imports of natural gas into India at the present time. All of this requires clarity on pricing.

The three parties shall endeavour to work with the Government to achieve a prompt and efficient resolution of this dispute.

Background

This background note explains the circumstances that forced RIL, BP and Niko, the contractor group of the D6 block, to file a notice of arbitration on the Government of India on May 9, 2014. As can be observed from the facts stated here, the contractor group was left with no other option.

Gas pricing has been debated for over two years with a Cabinet decision that approved a Rangarajan Committee price formula in 2013. This price formula was not an arms-length price as per the Production Sharing Contracts ("PSC"), yet it showed intent to move towards and transition to arms-length pricing. However, implementation of the Cabinet decision has been deferred leading to no clarity on gas price from April 1, 2014 for the contractor group to plan their future investments.

It has been well documented that the contractor group has been working diligently to arrest the decline from currently producing fields. In addition, the contractor group has an estimated 5 trillion cubic feet of discovered gas resources in the D6 block that await investment and development to be able to bring them to market. As has been stated before, these resources need clarity on long term gas prices to be developed economically.

Exploration and development activity is based on a pricing structure that enables investments. The PSCs promise an 'arm's-length, market determined' price for domestic gas. Having made a major discovery in 2013, the contractor group was getting ready to start investing in the development of discovered resources. The contractor group was upbeat over the opportunity to invest over $8-10 billion in development of discovered resources over the next 3-4 years. These investments could have significantly increased production by 2019. This would also help the country of India avoid LNG imports of more than $75 billion.

With this in focus, the contractor group had requested the Government in early 2012 to provide clarity on prices after 1Q 2014 (when the current price formula approved by the Government and the contracts to sell gas expired) to be able to progress development of discovered resources and increase exploration activities to find more gas in India.

The Rangarajan Committee, appointed by the then Minister of Petroleum & Natural Gas, Jaipal Reddy, proposed a formula for pricing of gas based on market prices of gas across the world for a period of 5 years before transitioning to gas-on-gas competition. This was to facilitate a transition to arms-length market prices.

The Cabinet Committee on Economic Affairs ("CCEA") in June 2013 endorsed the Rangarajan Committee formula as pricing for all domestic gas produced in India from April 1, 2014. The Ministry of Petroleum and Natural Gas (the "MoPNG") published guidelines for implementation of Rangarajan Committee formula as the new gas price formula in January 2014. The D6 Block is the only NELP block that is selling gas today and the contracts to sell gas from the D6 block at $4.2/mmbtu expired on March 31, 2014. Following expiry of the contracts, the new gas price was supposed to be calculated using the CCEA-approved formula.

The MoPNG was mandated to compute and notify the new gas price for the quarter April to June 2014 by early March 2014. The Election Commission, on March 24, 2014, advised deferment of announcement of the new gas price for the quarter starting April 1, 2014 till the Model Code of Conduct is lifted, due to elections and the matter being sub-judice in the Supreme Court. The Supreme Court, however, did not defer/delay notification of gas prices.

Hence, there is no gas price from April 1, 2014 for the current gas sales from the D6 block.

This resulted in an arbitrary decision by the MoPNG to force the contractor group to keep selling gas at $4.2/mmbtu after April 1, 2014. This is in contravention of the PSC and detrimental to the economic interests of the contractor group and the government.

Under protest but in good faith, the contractor group has kept supplying gas at $4.2/mmbtu to the customers.

The contractor group requested the government to announce the gas prices as soon as the Model Code of Conduct was over, with effect from April 1, 2014 as per the Cabinet decision and given that fact that the gas sales contracts had expired on March 31, 2014. The MoPNG indicated gas prices would only be announced for the 2nd quarter 2014, completely ignoring the Cabinet decision to change prices from April 1, 2014.

This contradictory move has resulted in a loss to the contractor group and the government of approximately $50 million per month.

Most capriciously, there is no clarity on what the gas price would be in the future, failing which all of the Contractor group's current and future investment plans are in jeopardy. The contractor group that was getting ready to sanction the first major project with an investment of $4 billion in June/July 2014 is now forced to halt activities. This major investment decision would have resulted in first gas from the project coming to Indian markets in 2017. One quarter's delay this year will delay this project by one year due to the construction weather window in the Bay of Bengal being lost. This will result in an increasing dependence on expensive LNG imports. A complete lack of clarity on gas prices going ahead has hence thrown all the contractor group's plans in disarray.

All such arbitrary, contradictory and contravening moves to deny contractually promised prices will deter future investments in the Indian E&P sector. The three Parties have, as a result, filed an international arbitration claim to secure a market price for gas as per the PSC.

The contractor group hopes for an early resolution of this dispute. The contractor group continues to be committed to delivering gas from the existing fields. The partnership will always act in the best interests of the people of India.

Forward-Looking Information

Certain statements in this press release constitute forward-looking information. Specifically, this press release contains forward looking information relating to the Company's planned capital program; expenditures, including those for development, appraisal and exploration; exploration results; gas prices; and governmental approvals. Undue reliance should not be placed on forward-looking information. Such forward-looking information reflects the Company's current beliefs and assumptions and is based on information currently available to the Company. These forward looking statements are based on certain key expectations and assumptions, including expectations and assumptions regarding its future growth; the outcome of potential asset sales and farm-outs; results of operations; production; future capital and other expenditures; business prospects and opportunities; prevailing commodity prices and exchange rates; applicable royalty rates and tax laws; future well production rates; the performance of existing wells; the success of drilling new wells; the availability of capital to undertake planned activities; general economic, market and business conditions; decisions or approvals of regulatory or administrative bodies; risks and uncertainties associated with the debt and equity capital markets. The reader is cautioned that the assumptions used in the preparation of such information, although considered reasonable at the time of preparation, may prove to be incorrect. Actual results achieved during the forecast period may vary from the information provided herein as a result of numerous known and unknown risks and uncertainties and other factors and such variations may be material.

Such factors include, but are not limited to: the risks associated with the oil and natural gas industry in general, such as operational risks in development, exploration and production, delays or changes in plans with respect to exploration or development projects or capital expenditures, the uncertainty of estimates and projections relating to production rates, costs and expenses, commodity price and exchange rate fluctuations, marketing and transportation risks, environmental risks, competition, the ability to access sufficient capital from internal and external sources, changes in tax, royalty and environmental legislation, the impact of general economic conditions, imprecision of reserve estimates, the lack of availability of qualified personnel or management, stock market volatility, the risks discussed under "Risk Factors" in the Company's most recent Annual Information Form and in the Company's public disclosure documents, and other factors, many of which are beyond the Company's control. This forward-looking information contains future-oriented financial information that is based on assumptions that in management's view are reasonable in the circumstances but readers are cautioned that this future-oriented financial information may not be appropriate for other purposes. Niko makes no representation that the actual results achieved during the forecast period will be the same in whole or in part as those forecast. The forward-looking information is presented as of the date of this press release, and the Company assumes no obligation to update or revise such information to reflect new events or circumstances, except as required by law.

Contacts:
Niko Resources Ltd.
Jake Brace
President
(403) 262-1020

Niko Resources Ltd.
Glen Valk
VP Finance & CFO
(403) 262-1020
www.nikoresources.com

More Stories By Marketwired .

Copyright © 2009 Marketwired. All rights reserved. All the news releases provided by Marketwired are copyrighted. Any forms of copying other than an individual user's personal reference without express written permission is prohibited. Further distribution of these materials is strictly forbidden, including but not limited to, posting, emailing, faxing, archiving in a public database, redistributing via a computer network or in a printed form.

Latest Stories
DevOps at Cloud Expo – being held November 1-3, 2016, at the Santa Clara Convention Center in Santa Clara, CA – announces that its Call for Papers is open. Born out of proven success in agile development, cloud computing, and process automation, DevOps is a macro trend you cannot afford to miss. From showcase success stories from early adopters and web-scale businesses, DevOps is expanding to organizations of all sizes, including the world's largest enterprises – and delivering real results. Am...
I wanted to gather all of my Internet of Things (IOT) blogs into a single blog (that I could later use with my University of San Francisco (USF) Big Data “MBA” course). However as I started to pull these blogs together, I realized that my IOT discussion lacked a vision; it lacked an end point towards which an organization could drive their IOT envisioning, proof of value, app dev, data engineering and data science efforts. And I think that the IOT end point is really quite simple…
Internet of @ThingsExpo, taking place November 1-3, 2016, at the Santa Clara Convention Center in Santa Clara, CA, is co-located with 19th Cloud Expo and will feature technical sessions from a rock star conference faculty and the leading industry players in the world. The Internet of Things (IoT) is the most profound change in personal and enterprise IT since the creation of the Worldwide Web more than 20 years ago. All major researchers estimate there will be tens of billions devices - comp...
Traditional on-premises data centers have long been the domain of modern data platforms like Apache Hadoop, meaning companies who build their business on public cloud were challenged to run Big Data processing and analytics at scale. But recent advancements in Hadoop performance, security, and most importantly cloud-native integrations, are giving organizations the ability to truly gain value from all their data. In his session at 19th Cloud Expo, David Tishgart, Director of Product Marketing ...
SYS-CON Events announced today that eCube Systems, a leading provider of middleware modernization, integration, and management solutions, will exhibit at @DevOpsSummit at 19th International Cloud Expo, which will take place on November 1–3, 2016, at the Santa Clara Convention Center in Santa Clara, CA. eCube Systems offers a family of middleware evolution products and services that maximize return on technology investment by leveraging existing technical equity to meet evolving business needs. ...
StarNet Communications Corp has announced the addition of three Secure Remote Desktop modules to its flagship X-Win32 PC X server. The new modules enable X-Win32 to safely tunnel the remote desktops from Linux and Unix servers to the user’s PC over encrypted SSH. Traditionally, users of PC X servers deploy the XDMCP protocol to display remote desktop environments such as the Gnome and KDE desktops on Linux servers and the CDE environment on Solaris Unix machines. XDMCP is used primarily on comp...
The 19th International Cloud Expo has announced that its Call for Papers is open. Cloud Expo, to be held November 1-3, 2016, at the Santa Clara Convention Center in Santa Clara, CA, brings together Cloud Computing, Big Data, Internet of Things, DevOps, Digital Transformation, Microservices and WebRTC to one location. With cloud computing driving a higher percentage of enterprise IT budgets every year, it becomes increasingly important to plant your flag in this fast-expanding business opportuni...
DevOps at Cloud Expo, taking place Nov 1-3, 2016, at the Santa Clara Convention Center in Santa Clara, CA, is co-located with 19th Cloud Expo and will feature technical sessions from a rock star conference faculty and the leading industry players in the world. The widespread success of cloud computing is driving the DevOps revolution in enterprise IT. Now as never before, development teams must communicate and collaborate in a dynamic, 24/7/365 environment. There is no time to wait for long dev...
Aspose.Total for .NET is the most complete package of all file format APIs for .NET as offered by Aspose. It empowers developers to create, edit, render, print and convert between a wide range of popular document formats within any .NET, C#, ASP.NET and VB.NET applications. Aspose compiles all .NET APIs on a daily basis to ensure that it contains the most up to date versions of each of Aspose .NET APIs. If a new .NET API or a new version of existing APIs is released during the subscription peri...
Data is the fuel that drives the machine learning algorithmic engines and ultimately provides the business value. In his session at Cloud Expo, Ed Featherston, a director and senior enterprise architect at Collaborative Consulting, will discuss the key considerations around quality, volume, timeliness, and pedigree that must be dealt with in order to properly fuel that engine.
SYS-CON Events announced today that StarNet Communications will exhibit at the 19th International Cloud Expo, which will take place on November 1–3, 2016, at the Santa Clara Convention Center in Santa Clara, CA. StarNet Communications’ FastX is the industry first cloud-based remote X Windows emulator. Using standard Web browsers (FireFox, Chrome, Safari, etc.) users from around the world gain highly secure access to applications and data hosted on Linux-based servers in a central data center. ...
SYS-CON Events announced today that Hitrons Solutions will exhibit at the 19th International Cloud Expo, which will take place on November 1–3, 2016, at the Santa Clara Convention Center in Santa Clara, CA. Hitrons Solutions Inc. is distributor in the North American market for unique products and services of small and medium-size businesses, including cloud services and solutions, SEO marketing platforms, and mobile applications.
As the world moves toward more DevOps and Microservices, application deployment to the cloud ought to become a lot simpler. The Microservices architecture, which is the basis of many new age distributed systems such as OpenStack, NetFlix and so on, is at the heart of Cloud Foundry - a complete developer-oriented Platform as a Service (PaaS) that is IaaS agnostic and supports vCloud, OpenStack and AWS. Serverless computing is revolutionizing computing. In his session at 19th Cloud Expo, Raghav...
Pulzze Systems was happy to participate in such a premier event and thankful to be receiving the winning investment and global network support from G-Startup Worldwide. It is an exciting time for Pulzze to showcase the effectiveness of innovative technologies and enable them to make the world smarter and better. The reputable contest is held to identify promising startups around the globe that are assured to change the world through their innovative products and disruptive technologies. There w...
Today we can collect lots and lots of performance data. We build beautiful dashboards and even have fancy query languages to access and transform the data. Still performance data is a secret language only a couple of people understand. The more business becomes digital the more stakeholders are interested in this data including how it relates to business. Some of these people have never used a monitoring tool before. They have a question on their mind like “How is my application doing” but no id...