Niko backs down at DGH anger on D-6 announcements

Vol 10, PW 8 (10 Aug 06) People & Policy

Niko Resources last month took the unprecedented step of promising the DGH it would stop making unilateral disclosures about Reliances D-6 discovery block where it holds 10%.

This follows a severe reprimand from the DGH at a meeting called with Reliance and Niko on 14th July in Delhi. Two weeks earlier on 30th June the DGH called a meeting on the same issue, also in Delhi.

Says an industry source: At the 30th June meeting the DGH expressed its displeasure with Nikos action. Anger centres on a Niko press release on 27th June, which tripled in-place gas reserves at D-6 from 11.9-tcf to 35.4-tcf.

DeGolyer & McNaughton made the original 11.9-tcf estimates for Reliance in 2005. Since then, Niko had commissioned rival reservoir consultant Gaffney Cline and Associates (GCA) to prepare an independent engineering report.

Niko commissioned the GCA study on its own without taking (partner and operator) Reliance into confidence. Says an industry source: Theoretically, theres nothing wrong in Niko commissioning its own consultant to do a reserves estimation, but protocol dictates that Reliance should have been in the picture.

These are issues that need to be handled very sensitively. DGH was also angry that Niko shared data on D-6 with a third party (GCA) without permission.

Companies should remember that all the data and the hydrocarbons of a block are ultimately owned by the government of India, continues our source. Contractors just hold a lease on the block.

Niko, we are told, regretted its error in making the public statement and the DGH decided against taking punitive action at the 14th July meeting. After all round discussion it was decided not to penalise Niko, we are told.

Niko agreed that in future all such disclosures would be made first to partners (in the operating committee) and then to the DGH (in the management committee). Niko also promised that no data concerning the block would be passed on to third parties without the DGHs prior approval.

DGH did not want to escalate the issue, we hear. They could have made an example of Niko but decided not to.

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