The firm was paid USD 36 million to settle an arbitration it had initiated against Reliance and BP trying to force it out of the block over default in payment.
"An amendment to the production sharing contract for the D6 Block in India has been executed, reflecting the assignment of the 10 per cent interest previously held by the company's indirect subsidiary, Niko (NECO) Ltd to the remaining interest holders in the block, Reliance Industries Ltd and BP Exploration (Alpha) Ltd," the statement said.
Subsequent to this, Reliance's stake in KG-D6 has gone up to 66.67 per cent from the previous 60 per cent and that of BP to 33.33 per cent from 30 per cent.
"Niko NECO had entered into a settlement agreement with Reliance and BPEAL under which it agreed to withdraw from D6 PSC and settle its arbitration case filed under the rules of the London Court of International Arbitration in December 2017 in exchange for a settlement amount of USD 36 million, subject to adjustment prior to closing," it said.
The settlement agreement is subject to certain conditions precedent including the execution of the amendment to the D6 PSC, it said adding the USD 36 million will go lenders to settle a part of the debt.
Niko, which defaulted on payment of loans to its lenders, had been unsuccessful in seeking a possible buyer for its 10 per cent stake in Bay of Bengal block KG-D6 or securing financing for its share of the USD 5 billion R-Cluster, Satellite Cluster and MJ development projects in the block.
This led to the company defaulting in making payments for its share of development cost.
Reliance, being the operator of KG-D6 block, slapped a default notice on Niko soon after.
Under the terms of the joint operating agreement (JOA) between the participating interest holders in the KG-D6 production sharing contract (PSC), during the continuance of a default, the defaulting party shall not have a right to its share of revenue (which shall vest in and be the property of the non-defaulting parties who have paid to cover the amount in default).
In addition, if the defaulting party does not cure a default within 60 days of the default notice, the non-defaulting parties have the option to require the defaulting party to withdraw from the KG-D6 PSC and JOA.
In December 2018, Reliance and BP sent Niko a notice asking it to withdraw from KG-D6. Parallelly, they approached the sector regulator the Directorate General of Hydrocarbons (DGH) and the Oil Ministry for approval to take over Niko's share.
To stall the takeover, Niko filed a notice of arbitration challenging the withdrawal notice.
Niko had previously withdrawn from the eastern offshore NEC-25 block due to cash crunch. Its 10 per cent interest was assigned to Reliance and BP. Subsequent to that, Reliance now holds 66.6 per cent interest in NEC-25 and BP the remaining 33.37 per cent.
Reliance and BP are investing USD 5 billion to bring to production three sets of new discoveries in the KG-D6 block. R-Series will be the first to start output in mid-2020 with about 5 million standard cubic metres of daily production. The peak from R-Series is expected at 12 million standard cubic metres per day (mmscmd).
Satellite fields in the same block will go live a year later and are expected to contribute a peak output of 7 mmscmd. MJ field will start production in second half of 2022 with peak production of about 12 mmscmd.
Reliance has so far made 19 gas discoveries in the Bay of Bengal block. Of these, Dhirubhai-1 and 3 (D1 & D3) -- the largest among the lot -- were brought to production from April 2009 and MA, the only oilfield in the block was put to production in September 2008.
The output from D1 and D3 has dwindled to just 1.7 mmsmcd after touching a peak of 54 mmscmd in 2010. MA ceased to produce last year.