Niko case: Bangladesh to receive Tk 5.12bn against Tk 123.71bn claim

The final verdict in the compensation case over the explosion at the Tengratila gas field in Sunamganj is finally approaching.

According to the ruling of the International Centre for Settlement of Investment Disputes (ICSID), Bangladesh may receive compensation of USD 42 million, which is equivalent to Tk 5.12 billion at the current exchange rate. The compensation will be paid by the Canadian company Niko Resources.

However, the Bangladesh government and BAPEX had claimed USD 1.014 billion (Tk 123.71 billion) as compensation for the gas that was burnt and the environmental damage caused by the explosion at the Tengratila gas field.

After speaking to six senior officials from the Energy Division, Petrobangla, and BAPEX it has been learnt that the amount of compensation was found on a brief summary of the verdict received through lawyers.

However, the full verdict has not yet been published. Once the complete ruling is received, discussions will be held with lawyers and further steps will be decided in consultation with the government, they added.

The officials also said the compensation amount is far too low. Bangladesh suffered much greater losses, and a significant amount of money was also spent on running the case.

Power, Energy and Mineral Resources Adviser Muhammad Fouzul Kabir Khan also confirmed the compensation issue to Prothom Alo. He said that the information about the compensation has been received on a preliminary basis, and that further decisions will be taken after reviewing the full verdict.

The Tengratila gas field, located in Chhatak of Sunamganj, was handed over to Niko in 2003 for gas exploration. After drilling began, two devastating explosions occurred at the gas field on 7 January and 24 June 2005.

The resulting fires burned off the field’s gas reserves and caused extensive damage to surrounding infrastructure and assets. Petrobangla demanded compensation of Tk 7.465 billion from Niko for the losses, but the company refused to pay.

In 2007, Petrobangla filed a case in a Bangladeshi court to recover compensation. At the same time, payment of bills for the Feni gas field, which was under Niko’s control, was suspended. The case against Niko later went to the High Court, which ordered the seizure of all Niko’s assets in Bangladesh and the cancellation of its contracts. When the case reached the Supreme Court, the verdict again went in favour of Petrobangla.

At a press conference on 19 May 2020, the then state minister for Power, Energy and Mineral Resources, Nasrul Hamid, said Niko had filed an arbitration case at ICSID in 2010, seeking a declaration that it was not responsible for the Chhatak gas field explosion.

In 2016, Bapex conducted a study through a committee formed with international experts. Subsequently, Bapex lodged a claim at ICSID seeking compensation of USD 118 million from Niko, while the Bangladesh government sought USD 890.6 million. Together, the total compensation claim stood at USD 1.014 billion (Tk 12,371 crore at current value), he added.

Nasrul Hamid also said the ICSID tribunal delivered its verdict on 28 February 2020, holding Niko responsible for breaching the terms of the joint venture agreement in relation to the 2005 explosions.

Two officials of Petrobangla and Bapex involved with the case told Prothom Alo that the amount claimed at ICSID was much higher than the compensation initially sought from Niko in Bangladesh, which had been questioned during hearings. There are some other issues as well, they said, and therefore it is not possible to comment before seeing the full verdict.

They added that during the previous government’s tenure, the premature disclosure of information about the ruling had created complications, including allegations of breaching ICSID’s confidentiality. As a result, they said, it would be prudent this time to wait for the detailed verdict rather than rushing to comment.

In 2008, when the case was being heard in a lower court, the National Committee to Protect Oil, Gas, Mineral Resources, Power and Ports protested against the compensation claim of Tk 7.46 billion from Niko. The committee said the losses at Tengratila were not Tk 7.46 billion but nearly Tk 220 billion.

The committee had further claimed at the time that after the 2005 accident, a government investigation committee had stated that only 30 billion cubic feet of gas had burned, whereas the actual loss was 242 billion cubic feet.

Anu Muhammad, former member secretary of the National Committee to Protect Oil, Gas, Mineral Resources, Power and Ports, told Prothom Alo on Friday that there had been negligence from the outset in determining the amount of compensation.

He said there were also weaknesses in filing the case and conducting the hearings, which is why proper compensation was not secured. However, he added, the verdict proves that Niko was responsible, which is a moral victory. If there is scope, the government may appeal on the issue of the compensation amount.

Energy and Mineral Resources Division Secretary Mohammad Saiful Islam also believes the compensation amount is disappointing compared with the claim. He told Prothom Alo that once the full verdict is received, it will be reviewed. He added that the total cost of pursuing the case is also being calculated.

Outside official government efforts, Professor M Shamsul Alam, energy adviser to the Consumers Association of Bangladesh (CAB), filed a case against Niko in Bangladesh’s High Court back in 2016.

He sought two remedies from the court: seizure of all Niko’s assets and recovery of compensation for the explosion. The court ordered the seizure of all Niko’s properties and directed the government not to pay USD 27 million in proceeds from gas sales to Niko in Bangladesh. As a result, the process of paying Niko’s gas bills was halted.

CAB energy adviser M Shamsul Alam told Prothom Alo on Friday that there had clearly been shortcomings in the capacity to realise the compensation claim. He said there was nothing to be satisfied about receiving millions of dollars after demanding billions, and that full and proper compensation must be recovered.

According to Petrobangla sources, the Tengratila gas field is divided into two parts: Chhatak East and Chhatak West. While gas from one layer of the Chhatak West section burned in the fire, other layers and the Chhatak East section remain intact. The field is considered to have potential reserves of between 2 and 5 trillion cubic feet of gas.

A development project proposal (DPP) has already been prepared for drilling new wells at the Chhatak gas field. Petrobangla officials said that once the final ICSID verdict is received, the next steps will be taken promptly after consulting legal advisers.