Bangladesh has secured its right to compensation of USD 106 million (Tk. 746 crore) for the Tengratila gas blowout from Canada-based oil company Niko Resources, as had been ordered by a Bangladesh court, at the International Centre for Settlement of Investment Disputes (ICSID).
The juries also observed that Niko’s first issues — where it sought a decision from the ICSID on “whether Niko alone is supposed to pay the compensation for Tengratila blowout under the joint-venture with BAPEX, and whether the Tk. 746 crore compensation, as claimed by the government, was realistic” — was not under the jurisdiction of the ICSID.
ICSID announced this verdict yesterday at London, finally upholding Bangladesh’s claim demanding payment of arrear compensation from Canadian company Niko for the massive damage caused by the two blowouts at Tengratila on January 7 and June 24 in 2005.
“ICSID said in its verdict that it will give us a guideline for the next course of action soon,” state-owned energy company Petrobangla’s chairman Dr. Hossain Monsur said. He added that the court said it is a joint venture issue and the issue should be discussed in the light of the joint venture agreement (JVA).
The government had formed two separate committees after the incident. The losses mentioned amounted to Tk. 746 crore, including Tk. 85 crore in environmental losses. The company did not even pay the total amount of the compensation agreed to 616 impoverished families, who were forced out of their homesteads for months, says the statement.
Expressing satisfaction, Prof. Anu Muhammad, member secretary of the National Committee to Protect Oil, Gas, Mineral Resources, Power and Ports, said, “Through this verdict it was proved that it was a valid claim by Bangladesh, but due to its inability to project the gas damage issue in a proper manner, Bangladesh has failed to encash the exact amount of compensation.”
The government and the Bangladesh Environmental Lawyers’ Association (Bela) filed two separate lawsuits in Bangladeshi courts after a probe committee determined that Niko should pay Bangladesh Tk. 746 crore in compensation. The High Court ordered the government to withhold payment for gas from the Feni field until the Tengratila dispute was settled.
In April 2010, Niko Resources filed case against Bangladesh with ICSID, contesting its liability in the Tengratila gas explosion of 2005. It also filed another arbitration suit challenging Bangladesh’s decision to withhold payment on gas produced from the Feni gas field until the claim for damages in Tengratila was settled.
Unhappy with the Bangladesh court’s verdict, Niko Resources Ltd lodged two arbitration suits with ICSID in 2010 against the Bangladesh government, Petrobangla and state-owned energy corporation Bangladesh Petroleum Exploration and Production Company Limited (BAPEX).
The government and Niko Resources in March 2007 agreed to hold the arbitration locally after Niko demanded an international arbitration, declining to accept Petrobangla’s estimation of gas and environmental losses in the twin blowouts at Tengratila (Chhatak) gas field in 2005. As the law ministry approved the local arbitration, which was supposed to be conducted by a three-member panel, Petrobangla sent to the ministry a list of six legal firms in April for the selection of its legal adviser.
In the first arbitration suit, Niko has sought a decision from ICSID on the compensation issue. Niko lodged another arbitration case with ICSID, seeking settlement of the Bangladesh government’s claim of Tengratila compensation from the outstanding Feni gas bills.
The government’s lawyer sent a “preliminary objection” against the first arbitration suit, saying the issues claimed by Niko for settlement are not under the jurisdiction of the ICSID.
The Bangladesh High Court in November 2009-10 directed the government not to pay Niko the gas bills that Petrobangla had been purchasing from the Feni field since 2004, until the government’s case was disposed of, or until Niko and the government reached a settlement over the compensation issue.
The blowout occurred when the Canadian company was conducting a relief well drilling at the remote location in Doarabazar upazila in Sunamganj district to seal the original one, which had suffered a huge blowout on January 7 the same year.
The June 24 blowout at Tengratila damaged the ecosystem and destroyed trees and croplands in the surrounding areas during the following weeks. Thousands of people had to leave their homesteads as the huge fireball leapt 150 feet above the gas field. The raging flames took about two months to completely go down.
In early January, a natural gas blowout at the Chattak-2 well destroyed the drilling equipment, and another rig was brought in for the pressure-relief well.
Niko first tried to enter the Bangladeshi energy sector in the late 1990s, but failed. It got a second chance when the Bangladesh Nationalist Party (BNP)-led alliance government took over power in 2001. Niko bagged the deal in 2003.
Niko began its drilling operation at Tengratila on 31 December 2004, and seven days later the first blowout occurred. Six months later, another blowout occurred at the same gas field. The blowouts cost Bangladesh about 1,794 billion cubic feet (bcf) of gas worth Tk. 13,631 crore.
The ACC, during the last caretaker government’s rule, filed another graft case against former premier Khaleda Zia, and 10 others on charges of corruption and abuse of power in awarding a gas exploration and extraction deal to Niko.
According to the case statement, the awarding of the contract caused a loss of Tk. 13,777 crore to the state exchequer during the rule of the BNP-led four-party alliance government from 2001 to 2006.
The development of two more production wells at Feni gas field and development of the Chhatak gas field got stuck because of disputes over the compensation issue. The company made its way into Bangladesh’s gas fields through a controversial joint venture agreement with BAPEX for Feni and Chhatak gas fields in 2003.
-With The Independent input
