Niko stops supplying gas from Feni field
Wednesday, 5 May 2010
M Azizur Rahman
Canadian oil and gas company Niko has finally stopped supplying gas from its Feni field due to a long pending dispute over payment of dues worth around US$35 million against the sale of gas. It stopped the gas supply without informing the government, officials said Tuesday.
The company stopped Feni gas production Saturday, a week after it had lodged an arbitration suit with the International Centre for Settlement of Investment Disputes (ICSID) over the same issue.
State-owned Petrobangla earlier requested Niko to continue production from the 43 square kilometre onshore gasfield, located some 100 kilometres off the capital.
Niko Resources is not getting any payment for the Feni gas due to an injunction from a local court that barred the government from paying the Canadian company because of compensation issues relating to two blowouts that occurred in 2005 in another Niko operated gasfield at Chhatak. It received around $4.0 million payments from Petrobangla for Feni gas before the court order.
Petrobangla Chairman Hossain Monsur confirmed the stoppage of gas production from the Feni field by Niko, but said it would not affect the country's energy scenario.
"We had no other option but to stop pro-duction, as we were not getting payments even to maintain our operating cost," a Niko official told the FE.
Niko had planned to stop Feni gas production immediately after the expiry of the company's sales and purchase agreement with Petrobangla in November 2009, but continued to supply gas until April 30, following requests from the state-owned company.
The company was supplying gas from the field since November 2004, except for nine days in early 2006, also over pending gas bill issue.
Before the latest stoppage of production, Niko was supplying around 2.0 million cubic feet of gas daily (mmcfd), down from 35 mmcfd during the initial years of production.
Industry sources, however, said the seed of the latest dispute was sown when the Canadian company began supplying gas from Feni field in November 2004 without signing any agreement with the government.
Later, two consecutive gasfield blowouts in the Niko-operated Chhatak field, locally known as Tengratila, in January and June 2005 further complicated the matter.
Niko signed the gas sales and purchase agreement in December 2006, two years after starting production, following wrangling with the government over gas pricing.
Initially, Niko Resources wanted $2.35 per unit (1,000 cubic feet), but finally agreed to receive $1.75 per unit for gas from the Feni field after the blowouts.
After the blowouts the government took Niko to a local court demanding Taka 7.46 billion ($110 million) as compensation for damages. The case is still pending with the court.
A local law firm also brought a public interest litigation against Niko and subsequently got an injunction order that barred the government from paying gas bills to the company until the compensation issue was settled.
Canadian oil and gas company Niko has finally stopped supplying gas from its Feni field due to a long pending dispute over payment of dues worth around US$35 million against the sale of gas. It stopped the gas supply without informing the government, officials said Tuesday.
The company stopped Feni gas production Saturday, a week after it had lodged an arbitration suit with the International Centre for Settlement of Investment Disputes (ICSID) over the same issue.
State-owned Petrobangla earlier requested Niko to continue production from the 43 square kilometre onshore gasfield, located some 100 kilometres off the capital.
Niko Resources is not getting any payment for the Feni gas due to an injunction from a local court that barred the government from paying the Canadian company because of compensation issues relating to two blowouts that occurred in 2005 in another Niko operated gasfield at Chhatak. It received around $4.0 million payments from Petrobangla for Feni gas before the court order.
Petrobangla Chairman Hossain Monsur confirmed the stoppage of gas production from the Feni field by Niko, but said it would not affect the country's energy scenario.
"We had no other option but to stop pro-duction, as we were not getting payments even to maintain our operating cost," a Niko official told the FE.
Niko had planned to stop Feni gas production immediately after the expiry of the company's sales and purchase agreement with Petrobangla in November 2009, but continued to supply gas until April 30, following requests from the state-owned company.
The company was supplying gas from the field since November 2004, except for nine days in early 2006, also over pending gas bill issue.
Before the latest stoppage of production, Niko was supplying around 2.0 million cubic feet of gas daily (mmcfd), down from 35 mmcfd during the initial years of production.
Industry sources, however, said the seed of the latest dispute was sown when the Canadian company began supplying gas from Feni field in November 2004 without signing any agreement with the government.
Later, two consecutive gasfield blowouts in the Niko-operated Chhatak field, locally known as Tengratila, in January and June 2005 further complicated the matter.
Niko signed the gas sales and purchase agreement in December 2006, two years after starting production, following wrangling with the government over gas pricing.
Initially, Niko Resources wanted $2.35 per unit (1,000 cubic feet), but finally agreed to receive $1.75 per unit for gas from the Feni field after the blowouts.
After the blowouts the government took Niko to a local court demanding Taka 7.46 billion ($110 million) as compensation for damages. The case is still pending with the court.
A local law firm also brought a public interest litigation against Niko and subsequently got an injunction order that barred the government from paying gas bills to the company until the compensation issue was settled.