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Two separate blowouts in Feni gas-field: Govt to resolve Niko issue out of court

Shamim Jahangir

The government will settle over US$27.3 million outstanding gas bills issue with Niko Resources Bangladesh Limited (NRBL) outside the court to increase gas production from Feni gas field, reliable sources said.

Bangladesh disagreed to pay gas bills US$27.3 million to NRBL following directive of the respective High Court since 2005. The verdict directed the government to refrain from making any payment to the Canadian company, which probe bodies found responsible for the damage of Tengratila gas field in Chhatak.

“Wait and see….we will get better result over Niko issues,” Petrobangla Chairman Prof Hossain Monsoor told The New Nation.

He said that the government would resolve the compensation issues on two separate blowouts in Feni gas field immediately.

In December 2009 NRBL threatened the government to discontinue gas production from the Feni gas field with a prior notice if Petrobangla fails to initiate new gas purchase and sales agreement (GPSA). The government must settle compensation issues on Feni gas field immediately, the NRBL said through a letter.

“The GPSA of the Feni gas field had expired on November 2 last year. No agreement has been reached between the parties with respect to gas prices for gas supplied after November 2,” a NRBL delegation told the outgoing Energy and Mineral Resources Secretary Mohammed Mohsin recently.

“We continued gas production on a short term basis in good faith. This production may continue till the issues relating to the payment and fixation of a new gas price after the expiry of the present GPSA on November 2, 2009 are resolved expeditiously,” the team said adding, “under no circumstances production would continue for an indefinite period. If the Petrobangla fails to make any positive movement towards resolving the issues, then NRBL would at liberty to discontinue production from the Feni gas field with a prior notice.

Besides, NRBL also wants to settle the Tengratila blowout compensation of US$110 million through arbitration as per the procedures of the International Centre for Settlement of Investment Disputes (ICSID).

“We still intend to settle the compensation claim of Chhattak blowout following the procedures of ICSID,” a NRBL delegation said during the meeting. We would welcome the Government to join NRBL in making joint submission to ICSID, the delegation added.

NRBL said it was optimistic about additional gas reserves in Feni and Chattak fields if further investments are made after settlement of outstanding gas bill and other issues.

Relations between Niko and the government of Bangladesh started getting strained immediately after two consecutive blowouts in January 2005 and June 2005 in the Niko operated gas field at Chhatak, locally named Tengratila.

Failing to reach any consensus over the compensation issue of these blowout the government had lodged a case in the local court demanding Tk 7.46 billion ($110 million) as compensation from Niko. The case is still pending before the court.

Regarding compensation a Bangladesh lawyer and human rights organisation also filed public interest litigation (PIL) case against Niko and subsequently got judgment, which barred the government paying gas bills to Niko until the compensation issue is settled.

It also ordered freezing of Niko’s account in Bangladesh, which was later vacated. Before the court order, Bangladesh government paid Niko $4 million as gas bills.

According to the findings of several probe committees on the Tengratila blasts, Petrobangla in its letter said three billion cubic feet (BCF) gas had been lost from the surface level and another 5.9 BCF from the sub-surface level of the Tengratila gas field.

The probe committees found Niko’s poor planning and operation for the two rounds of blowouts.

Though the initial production from Feni was as high as above 30 million cubic feet per day, its production has currently come down to 1.9 million cubic feet per day as it is not developing its gas field, sources said.