Canadian oil and gas exploration company Niko Resources is set to abandon its gas block in Surat, Gujarat, as the fields have been fully exploited.

This was one of the three producing blocks from the contracts signed under the country’s nine oil and gas auctions. The other two are Reliance Industries-operated D6 block and Gujarat State Petroleum Corp-operated Cambay onshore block. So far, 254 contracts have been signed.

Officials at both the Directorate-General of Hydrocarbons and Niko told Business Line that the process to abandon the block had been initiated. It is a long process, as a lot of issues, including returning the land to the owners, need to be addressed, an official said.

This block, which was awarded to Niko in the second round of the New Exploration Licensing Policy (NELP), started production in 2004, making it the first NELP block to go into production.

Niko has made investments of close to $70 million in the block and produced 24.8 billion cubic feet of gas since 2004, which it has sold at market prices. In the latter years, the gas was sold at close to $7 a unit (gas is measured in million British thermal units).

In 2012, however, the Petroleum and Natural Gas Ministry said the company’s price would be provisional till the Government took a final decision on gas pricing.

According to Niko, it had followed the production-sharing procedure for getting the pricing formula approved by the Government. The price was derived based on market conditions.

Niko will now be left with interests in three blocks, of which, two are in partnership with Reliance Industries and BP.

Industry observers say there is a lead time of three-four years for NELP blocks to come into production. Discoveries have been made in NELP blocks. According to the Ministry data, six discoveries are under production and 12 under development.

But there are other external reasons for the delay. Many of the initial NELP blocks have not gone into production because of regulatory hurdles, coupled with technological bottlenecks. The Ministry has been working on it and a policy has been recently approved that will reduce the discovery-to-delivery cycle-time and boost production.

India has an estimated sedimentary area of 3.14 million sq. km, comprising 26 basins. Of these, about 2.23 million sq. km, or 71 per cent, has been awarded for exploration under nomination, production-sharing contracts and NELP regime. According to projections made by GAIL (India), the gas demand stands at 225 mmscmd. The current supplies are 130mscmd, of which, domestic production accounts for 90 mscmd, and imported gas, 40 mscmd.

> richa.mishra@thehindu.co.in

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