Niko Signs Production Sharing Agreements in Pakistan

Source: www.gulfoilandgas.com 3/3/2008, Location: Asia

Niko Resources announced the company has signed four (4) Offshore Production Sharing Agreements (PSA's) with the President of the Islamic Republic of Pakistan and Government Holdings (PVT) Limited, through the Secretariat of the Ministry of Petroleum and Natural Resources. Niko will have a 100% Participating Interest in the Blocks.

The Blocks are located in the Arabian Sea near the City of Karachi and are designated as: Block No. 2466-7 (Offshore Indus North), Block No. 2466-6 (Offshore Indus Z), Block No. 2465-3 (Offshore Indus X) and Block No. 2465-4 (Offshore Indus Y).

The Blocks are situated in the Indus Fan system, the second largest submarine fan in the world and cover an area of approximately 10,000 sq. km. Water depths range from transition zones (onshore to offshore) to deep water.

Some key features of the fiscal terms include:

- No contract signing bonus
- 85% of oil or gas production available for cost recovery
- Royalty of 0% on gross production for first 48 months following start of commercial production and increases to a maximum of 12.5% in the 7th year of production
- Royalty of 5.0% on gross production for months 49 - 60
- Maximum Royalty of 12.5%
- Contractor receives 80% of Profit Oil up to first 100 mmbbl; 90% of Profit Gas up to 100 mmboe;
- Higher Profit Oil/Gas percent for recovery from deeper horizons
- Oil pricing is based on basket of Arabian/Persian Gulf crude oils plus or minus quality differential
- Gas is priced calculated using a Gas Price Ceiling adjusted by Reference Crude Price based on basket of Arabian/Persian Gulf crude oil imported into Pakistan.

The Initial Term of the exploration work as per the Agreements is for five (5) years. In each block a minimum of 200 sq. km. of 3D seismic is to be acquired in the first Phase of the Initial Term. The minimum work program for each block for the entire 5 year initial Term is 820 work units. Work in the country will begin immediately to establish an operating presence and organize the seismic survey work within the first year of the Contract.


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