$106m Tengratila Compensation Claim Niko fails to dodge it

International tribunal says it has no jurisdiction over the Canadian firm's deals in Bangladesh

Niko fails to dodge itAn international tribunal yesterday rejected the Canadian company Niko’s challenge over the Bangladesh government’s claim regarding payment of $106 million in compensation for two blowouts at Tengratila Gas Field in Chhatak.
The government filed a damage suit with a Dhaka court in June 2008 against Niko Resources Bangladesh Limited, claiming Tk 746.5 crore ($106m) in recompense for the destruction of properties and gas reserves in and around the gas field.
The controversial company that reportedly bribed politicians to secure a joint venture deal with Bapex in 2003 took the matter to the International Centre for Settlement of Investment Disputes (ICSID) in London in 2011.
Before the tribunal, Niko challenged the case and another issue related to payment for gas sales from the Feni gas field, which the Canadian company operates with Bapex.
The ICSID’s ruling yesterday watered down the company’s hopes for dodging the compensation for the Chhatak blowouts and the other claim of payment for gas sales from the Feni field.
Tawfique Nawaz, a senior advocate of the Supreme Court, led Bangladesh’s legal team. He was assisted by advocate Imtiaz Farooq, and Alison Catherine McDonald and Luis Gonzalez Garcia of Matrix Chamber in London.
During proceedings, Bangladesh challenged the tribunal’s jurisdiction to hear Niko’s claims.
In its decision, the tribunal, presided over by Michael E Schneider, said it “has no jurisdiction over Bangladesh, which therefore no longer be a     respondent in this arbitration.”
The tribunal said it also had no jurisdiction over Petrobangla under the    joint venture agreement signed between Niko and Bapex.
Petrobangla Chairman Hossain Monsur disclosed the development at a press briefing at his office in the afternoon.
“It is now for the district judge’s court of Bangladesh to make the final decision,” he said.
The recording statement of the court has been completed and the hearing will take place soon, said officials of Petrobangla.
Monsur said the tribunal ruled that Niko would have to come to it along with Bapex for the arbitration suit to be sustained, as Niko and Bapex were parties in the joint venture.
“Bapex will not go to the tribunal,” he added.
According to the 2008 case documents, Niko entered into a joint venture with Bapex on October 16, 2003, for development and production of petroleum from the Chhatak and Feni gas fields. Niko started drilling the Chhatak-2 well on December 31 the following year.
Niko drilled the first well there without the required approval of a Joint Management Committee. It met with the first blowout on January 7, 2005, in Tengratila of Sunamganj.
A follow-up inquiry committee of the energy ministry found the blowout had resulted from operational failure and inappropriate casing design.
Niko took up a programme for drilling a relief well to contain the blowout. While the well drilling was in progress, another blowout occurred on June 24, 2005.
“Niko did not have experience of its own in respect of designing and implementing relief well and Niko engaged GSM Inc. to design and supervise the relief well operation,” stated the case.
More inquiry committees were formed and all of them held Niko responsible for operational failures, negligence and inappropriate casing designs for the blowouts. They observed that the field might have lost roughly about 1 billion cubic feet gas.
On December 6, 2005, the government formally demanded compensation from Niko.
As the company did not respond, Petrobangla served it with a legal notice on May 27, 2008, followed by a schedule of the claim giving a breakdown of Tk 746 crore.
Niko through a study tried to play down the damage and said the field had only 110 bcf gas. But a 1996-97 study of Petrobangla had identified a resource base of 1.9 trillion cubic feet (tcf) there — of which 1.1 tcf might be commercially produced.

Source: The Daily Star