Niko had earlier withdrawn from the NEC-25 block in India's eastern offshore region and its 10% share had gone to RIL and BP.
An arbitration tribunal has been constituted to resolve the dispute between Reliance Industries (RIL)-BP and Canadian firm Niko Resources over payment defaults related to field development cost by the latter for its 10% participating interest (PI) in the KG-D6 gas block. The tribunal will soon start the proceedings, RIL said in its annual report for 2018-19.
On December 19, 2018, Niko had invoked the arbitration process after it was asked to withdraw from the production sharing contract as it defaulted on cash calls and was served a default notice by RIL-BP as per provisions of the joint operating agreement (JOA).
RIL is the operator of the block with 60% PI and BP holds 30%. Under an JOA, the operator of a block makes investments required for field development and partners are required to pay as per their shares when the operator raises cash calls. In cases of defaults, the defaulting party is also not paid its share of revenue and that is retained by other parties making investments.
Niko had defaulted on cash calls due in October 2018.
RIL in its annual report did not elaborate on the composition of the arbitration tribunal. Usually, either a sole neutral arbitrator is appointed through mutual agreement among the parties involved or both parties appoint one arbitrator each and these arbitrators appoint a third neutral arbitrator.
The Canadian firm had been unsuccessful in finding a buyer for its share or find a lender for its share of investments amounting to around $6 billion in the KG-D6 block which constitutes R-Cluster, Satellite Cluster and MJ development projects. Field development plans for these projects are approved by the government and development activities are underway.
Niko had earlier withdrawn from the NEC-25 block in India’s eastern offshore region and its 10% share had gone to RIL and BP. The field development plan for the block has been submitted and is under review by the government, RIL said in its annual report. The Directorate
General of Hydrocarbons had in 2013 refused to approve a development plan for NEC-25 submitted by the consortium. “Pending completion of assignment of PI of Niko (6.67%) to the company, net payments made on behalf of Niko (i.e. 6.67%) since the date of default notice is classified as receivable in the books of accounts,” RIL said in its annual report. The balance 3.33% due expenses of Niko is being born by BP.