Compensation for gas blowout blocked by legal tangles

A long-pending dispute between Canadian company Niko Resources and state-run Petrobangla has blocked the way of realising compensation for the gas blowouts and the problem will be dragging on until legal tangles are removed, experts said.       
They are of the opinion that the Gordian knot cannot be unravelled until resolving a High Court injunction and settlement of a money suit lodged with a local court.
Responding to a public-interest litigation filed by Bangladesh Environmental Lawyers' Association (BELA), the High Court in an injunction in 2009 barred the government from paying gas bills to Niko until the compensation for the gas-field blowouts was settled, they noted.
Petrobangla in 2008 lodged a money suit with a local court, seeking Tk 7.46 billion ($106 million) in damages from the foreign firm for the Tengratila gas-field blowouts that occurred when Niko was on operation.
The legal experts expressed their skepticism as Niko and Petrobangla failed to reach an amicable settlement with respect to the modalities for implementing a decision of the Washington-based International Centre for Settlement of Investment Disputes (ICSID) on payment claim within the ICSID-set timeframe.
September 30 last was the deadline.
The ICSID in its verdict on payment claim last month stated that Petrobangla owes Niko US$25,312,747 plus Tk 139,988,337 as per Niko's invoices for gas delivered from November 2004 to April 2010.
"Petrobangla must pay simple interest on Niko's invoices at the rate of six month LIBOR (London interbank offered rate) plus 2.0 per cent for the US dollar amounts and at 5.0 per cent for the amounts in Bangladeshi Taka," the September 11 ICSID verdict spelled out.
Interest is due on the amount of each invoice from 45 days after delivery of the invoice but not before May 14, 2007 and until it is placed at Niko's unrestricted disposition, the order maintained.
The ICSID verdict also maintained that failing amicable settlement, any party may seize the tribunal for recommendations on provisional measures or a final decision concerning the outstanding amounts.
A further hearing at the ICSID is next month over another case filed by Niko. In this case, the company sought a declaration that it had no liability for the two preventable gas explosions in Chhatak wells (Tengratlla), and that Niko owed no compensation to Bapex or Petrobangla for the damage.
"Petrobangla now wants to settle the disputes with Niko after the final verdict of ICSID over the remaining case on compensation," a senior official said.
The ICSID earlier in a provisional measure in May had directed that Niko would not directly or indirectly dispose of its assets in Bangladesh until disposal of the money suit and without the prior written consent of Petrobangla and the government of Bangladesh.
The tribunal also opined that Niko will withdraw its application for a stay on the money suit and give an undertaking to the court in money suit that it will not directly or indirectly dispose of its assets in Bangladesh until the disposal of the money suit and without the prior written consent of Petrobangla and the government of Bangladesh.
Officials said the dispute between Petrobangla and the Canadian company was sown when Niko Resources started supplying natural gas from Feni field in November 2004 without signing any agreement.
Two consecutive gas blowouts in the Niko-operated Chhatak field in northeastern Bangladesh, locally known as Tengratila, in January and June 2005 further complicated the issues.
Initially, Niko Resources wanted $2.35 per unit (1,000 cubic feet), but finally agreed to $ 1.75 per unit for gas from the Feni field after the blowouts.
Niko signed the gas sales and purchase deal in December 2006, two years after starting production and one and a half years after the gas-field accidents.
Niko Resources stopped supplying gas from Feni gas field in May 2010 over non-payment against gas sales a week after it had lodged an arbitration suit with the ICSID.
Before the latest stoppage of production, Niko was supplying just 2.0 million cubic feet per day (mmcfd) of gas -- much below the initial supply of around 35 mmcfd during 2006.
The company attained operatorship of the Feni field under the terms of a 2003 joint-venture agreement (JVA) with state-run Bangladesh Petroleum Exploration and Production Company (Bapex). The deal gave it an 80-percent stake.
The remaining 20 per cent went to Bapex.
The company also had attained exploration rights over three onshore gas fields -- Feni, Chhatak and Kamta -- following the JVA as the fields were declared 'abandoned' by Petrobangla.
Niko succeeded in striking the JVA deal without any competitive bidding.
Apart from the JVA, Niko along with Singapore's KrisEnergy and Bapex is also involved in a production-sharing contract (PSC) for block 9 in Bangladesh, with KrisEnergy being the operator.
Niko entered block 9 after purchasing stakes from the then Chevron and Texaco.
Currently, Niko has 60-percent stakes in block 9 that produces around 110 mmcfd gas from Bangura field, while 30 per cent, including operatorship, goes to Tullow and remaining 10 per cent to Bapex.

azizjst@yahoo.com