Niko

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Niko is a junior exploration and production company based in Calgary, Canada and listed on the Toronto Stock Exchange with a focus on producing natural gas in the South Asia region. IFC has been asked by Niko to consider providing financing of up to $80 million as part of a $340 million financing package to be provided together with some other investors to support the Company in the following areas:1. To finance the capital expenditure program in the KG-D6 block in India, consisting of (i) work-over of existing wells in the D1-D3 field, (ii) the development of the R-cluster and Satellite fields, and (iii) upgrading the surface facilities; 2. To finance the capital expenditure plan in the Block 9 in Bangladesh, consisting of (i) two development wells, (ii) upgrading the production facility, and ( iii) installation of additional compression to arrest production declines; and3. To restructure the Company’s debt by refinancing expiring debt instruments with loans of a longer maturity.In addition to providing the financing, IFC together with other anchor investors plan to help improve the Company’s environmental and social management systems and corporate governance which are considered critical by the Company for a future growth. Niko was an IFC client from 2003-2006. IFC extended a $40 million loan to Niko in 2003 to support its capital expenditure program for two onshore gas fields in West India (Hazira and Surat). In 2006, IFC’s loan was repaid by the company in 2006.Managed AssetsNiko has 29 managed assets distributed as follows: 2 in India (1 producing and 1 to be relinquished), 3 in Bangladesh (1 producing and 2 shut-in / suspended), 17 in Indonesia (all exploration blocks) and 7 in Trinidad and Tobago (all exploration blocks).In India, Niko is the operator in (i) the Hazira field onshore/offshore West India which is close to depletion, and (ii) the onshore Surat Block adjacent to the Hazira field (production completed and block to be relinquished).In Bangladesh, Niko owns a 60% working interest of Block 9 at Bangora, in Comilla district (Bangora field), operated by Tullow Bangladesh which owns a 30% interest. The remaining 10% interest is owned by Bapex (Bangladesh’s national oil company). The Bangora field is an existing gas development, producing 110mmcf/d of gas. Phase 3 upgrade work is ongoing, involving some well workovers, conversion from diesel to gas engines and various new infrastructure with a focus on facility safety upgrade. Two development wells and the installation of additional compression have been planned for 2014-2015 to help arrest production declines. Tullow Oil plc (Tullow) is an IFC client and Tullow’s corporate EHS management system is consistent with IFC Performance Standards requirements. In April 2013, Tullow through its subsidiary, Tullow Oil International, has signed a sales and purchase agreement with KrisEnergy Asia Holdings BV, a subsidiary of KrisEnergy Asia Limited, for the sale of Tullow Bangladesh. The agreement is currently pending government approval. KrisEnergy will therefore acquire the operatorship of Block 9. KrisEnergy is an independent upstream company focused on the exploration, development and production of oil and gas in the basins of Southeast Asia. Block 9 is the first asset of KrisEnergy in South Asia, as well as its first operated producing asset. As part of the agreement, Tullow Bangladesh’s team (management and staff) and assets will be transferred to KrisEnergy. KrisEnergy website (http://www.krisenergy.com/index.cfm) presents commitments to environment, health, safety protection and security (EHSS) in all of its activities and to generally adopt international practices and standards in the management of EHSS issues, to comply with local laws and regulations, and to work with the objective of trying to ensure that local people and businesses benefit from company’s activities. KrisEnergy Environmental Policy Statement, Health and Safety Policy, and Code of Conduct are publicly disclosed on the website.Niko maintains an 80% working interest and operatorship in both the Chattak onshore gas field, located in the Surma Basin, and in the Feni onshore gas field, located in the Bengal Basin, Bangladesh. Feni is currently shut-in and plant operations suspended. There is no production from Chattak due to unresolved litigation arising from blowouts that occurred in 2005 during development drilling. Niko Indonesia operates 17 blocks, all in the exploration stage. The blocks fully owned and operated by Niko include: South East Ganal, West Sageri, Sunda Strait I, South Matindok, South East Seram, Kofiau, and Obi. Blocks operated by Niko with Statoil, a Norwegian multinational E&P company, as the non-operating partner, include: Halmahera-Kofiau, Cendrawasih, Kumawa and Bone Bay, West Papua IV, North Makasar Strait, and Aru. Blocks operated by Niko with Repsol, a Spanish multinational E&P company, as the non-operating partner include: East Bula, Seram, Cendrawasih Bay III and IV. Niko is actively working on reducing its working interest and operatorship for its Indonesian assets. The exploration program in Indonesia has recently been suspended.In Trinidad and Tobago, Niko currently has working interests in 10 PSCs (exploration blocks), out of which 7 are operated assets. Niko is in the process of farming out its assets in the country.Non-managed AssetsNiko has 10 non-managed assets distributed as follows: 2 in India, 4 in Indonesia, 3 in Trinidad and Tobago, and one in Madagascar. With the exception of Block KG-D6 in India, all non-managed assets are exploration blocks.In India, Niko owns a minority 10% working interest in Block KG-D6 in the Krishna-Godavari Basin off the east coast, consisting of the producing D1-D3 gas field, the D-26/MA oil, gas and condensate field and a number of smaller undeveloped satellite reservoirs. Reliance Industries Limited (RIL) is the operator with 60% working interest; and BP owns the remaining 30%. These are deepwater, high-pressure reservoirs and are thus considered relatively high risk. As highlighted on RIL website (http://www.ril.com/), the partnership aims at combining BP''s deepwater exploration and development capabilities with RIL''s project management and operations expertise. RIL has developed and implemented an integrated HSE Management System with procedures for process safety management, process hazard analysis, quantitative risk assessment, internal and external auditing, monitoring and reporting. RIL website commits to the use of Safety Case approach for the onshore and offshore facilities and to the establishment and maintenance of emergency management systems (including oil spill response) up to best industry practice. The integrated management system for KG-D6 asset comprising of onshore terminal, supply bases and offshore facilities is certified with ISO-9001:2008; ISO 14001:2004 and OHSAS 18001:2007 by Det Norske Veritas (DNV) since April 2010. Environment performance indicators have been developed based on Global Reporting Initiative''s guidelines 2006. With respect to human resources (HR) management, RIL website commits to review and benchmark HR policies with world class organizations. A state-of-the-art Occupational Health Center is operated at the KG-D6 onshore terminal. A Corporate Social Responsibility (CSR) program has been developed and is being implemented, maintaining ongoing communication with local authority and community members, including fishermen.Block NEC-25 (a block in pre-development phase, also operated by RIL), offshore East India in the Bengal Basin, is an asset which Niko is in the process of farming out to help balance its funding need. In Indonesia, non-operated assets include the following exploration blocks: Halmahera II (Statoil), North Ganal (Eni), Lhokseumawe (Zaratex), and Cendrawasih II (Repsol).In Trinidad and Tobago Niko has minority working interest in three blocks which are operated by British Gas and Parex Resources. Niko is in the process of farming out these assets.In Madagascar, Niko recently received approval from the Government of Madagascar for a farm-out of a 40% interest and operatorship to OMV in an offshore exploration block, Grand Prix PSC, off the west coast of Madagascar. Niko retains a minority 35% working interest.