Niko slips on report of India rejecting RIL's cost recovery plan

Last Updated: Fri, May 04, 2012 20:00 hrs

REUTERS - Shares in Niko Resources Ltd fell as much as 4 percent on reports that India had rejected its partner Reliance Industries Inc's 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 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)

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