Niko Resources

completed

The Hazira development involves the expansion of the Hazira production capacity. The development program will entail drilling and completion of 17 wells, the construction of an offshore platform and installation of subsea equipment. The Surat project involves the drilling of up to 15 development wells and installation of tie-in pipelines to a nearby national grid. Promoting development of domestic gas resources: The project will contribute to developing India''s scarce domestic gas reserves. India is the world''s sixth largest energy consumer, but is strongly deficit in oil and gas. While the country''s consumption of natural gas has risen faster than any other fuel in recent years, natural gas still contributes to less than 10% of India''s total energy consumption. In the absence of major new sources, total domestic gas production is forecast to sharply decline over the coming decade.Enhancing availability of a cheaper and clean fuel: Gujarat''s power sector is strongly dependent on more expensive naphtha supplies or relatively inferior coal brought from India''s central and eastern states. The project will strengthen availability of locally produced gas as fuel for power generation, city gas distribution, and for small industry. In addition to lower cost, increasing availability of gas offers advantages of promoting use of a more clean and convenient fuel in the state. Promoting private sector participation: Since the early nineties, India has implemented strong policy changes to encourage private and foreign investment in its E&P sector. Although success remains moderate, a number of small local and foreign companies such as Niko have successfully entered the sector and seek to grow their operations. IFC''s investment in this project will help support a growing private sector role in the upstream hydrocarbons sector. Direct economic benefits: The government will receive payments from royalties, production sharing and corporate taxes. IFC Role: For a small private player in a sector dominated by public sector enterprises, IFC''s support to this project will help the company move to the next phase of growth in its operations in the country. Niko has generally not relied on long term debt in the past to support its international investments in India. Niko does not have an Indian subsidiary, based on tax considerations, and is unable to raise finance locally from Indian banks. Niko has sought IFC''s involvement, looking to our strong operating familiarity with the Indian environment, to support its current debt program.