November 14, 2014 / 3:48 PM / in 4 years

UPDATE 1-Canada's Niko Resources says evaluating plans for India assets

(Adds details, background)

Nov 14 (Reuters) - Canada’s Niko Resources Ltd said it was evaluating plans for its oil and gas assets in India, citing uncertainty related to the outlook for natural gas prices in the country.

Niko owns 10 percent in the D6 Block, off the eastern coast of India. BP Plc has a 30-percent stake in the block, while the rest is owned by India’s Reliance Industries Ltd .

The company also holds a stake in the Hazira field in western India.

Gas output from the block has fallen sharply over the past few years. Reliance says the decline is due to the geological complexity of the block, while the Indian government believes contractors have failed to drill the promised number of wells.

Demand for gas in India far outstrips production, but prices have been kept low for important industries such as fertilizer production and power generation, deterring investment in the sector.

Last month, the Indian government increased gas prices by 33 percent to $5.61 per million British thermal unit from Nov. 1 and is expected to revise rates every six months.

Domestic gas producers such as Reliance Industries and ONGC insisted on a price hike because the cost of exploring new reserves is more than the current price, leaving them reluctant to take the risk. {ID:nL3N0NW096]

Niko said on Friday it would receive a cash benefit of $4 million thanks to the jump in gas prices, but added that it remained concerned about long-term prices.

The company’s sales volumes from the D6 Block dropped 13 percent to 47 million cubic feet equivalent per day in the second quarter ended Sept. 30.

Sales volumes from its Block 9 in Bangladesh rose 16 percent to 65 mmcfe/day.

Niko, which is in the process of restructuring itself, sold its interest in the Grand Prix block in Madagascar in July.

The company also sold its interests in seven Indonesian deepwater production-sharing contracts to a unit of Ophir Energy Plc last month.

Niko, which had raised doubt about its ability to continue as a going concern in November last year, said it had unrestricted cash and cash equivalents of $120 million, as of Sept. 30. (Reporting By Kanika Sikka in Bangalore; Editing by Saumyadeb Chakrabarty and Maju Samuel)

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