* India's Reliance, BP, Niko part of consortium
* Geological assessment, commercial outlook kill interest
* Niko shares slide 4 pct, Reliance shares end down
(Adds comments from Niko CEO, updates stock quote)
By Maneesha Tiwari and Prashant Mehra
BANGALORE/MUMBAI, May 22 (Reuters) - India's Reliance
Industries and partners BP and Canada's Niko
Resources have abandoned the D4 oil and gas block off
India's east coast, Niko said, underlining the production
problems in the region.
The D4 block, situated in the Mahanadi Basin, lies north of
Reliance's main D6 block in the neighboring Krishna-Godavari
Basin, where gas output has declined sharply over the last year,
marring the growth outlook for the Indian energy major and
forcing the government to hold back approvals.
Niko, based in Calgary, Alberta, said its decision and that
of its partners stemmed from the current geological assessment
related to the size of the trapping mechanism and the commercial
environment prevailing in India.
The partners drilled no wells on the block, Niko Chief
Executive Edward Sampson said.
Niko's stock was down C$1.46, or 4 percent, at C$32.60 late
in the session on the Toronto Stock Exchange. Earlier it dropped
as much as 16 percent.
Sampson said he was somewhat surprised by the steep initial
drop, speculating that some investors may have misread the
abandonment as being for the much more important D6 Block.
"From our geological model of it (D4), we just feel that the
reserve potential is just not as great as we once envisioned
with it," Sampson told Reuters. "Secondly, the commercial terms
in India right now are not moving as fast as a person would
Niko had been required to conduct seismic work and drill
three exploration wells until June 2013 on the block, which is
spread over 17,000 square km, according to information on its
The company has a 15 percent interest in the D4 block, while
BP holds 30 percent. Reliance owns the rest and is also the
operator of the block.
According to reports, in 2010, Niko initially estimated the
D4 block could be twice as large as the flagship D6 block in the
Krishna-Godavari Basin and hold as much as 100 trillion cubic
feet (tcf) of gas.
However, analysts currently estimate the D4 block's reserves
at a small fraction of that number.
"It is not that significant a block. But it just reiterates
that the exploration and production block that Reliance holds is
not that promising. The entire block is being relinquished,"
Ambit Cap analyst Dayanand Mittal said.
A Reliance spokesman did not immediately comment. Officials
at BP declined to comment on the matter.
Earlier this month, Reliance cut estimates for proven gas
reserves in its Indian blocks by 7 percent to 3.67 trillion
cubic feet (tcf), blaming low pressure and uneconomic volumes
for the lower-than-expected volumes.
Niko holds a 10 percent stake in the D6 block, which is
estimated to hold probable reserves of more than 9 tcf of gas.
Last year, Reliance sold a 30 percent stake in 21 oil and gas
blocks - including in KGD6 and D4, to BP, in a $7.2 billion
Reliance shares closed 0.6 percent lower at 691.10 rupees,
in a Mumbai market down 1 percent.
(Additional reporting by Jeffrey Jones in Calgary and Aftab
Ahmed in Bangalore; Editing by Jon Loades-Carter; and Peter