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Govt reviews Petrobangla-Niko arbitration decision PDF Print E-mail
Wednesday, 30 January 2008

Staff Correspondent

The government is reviewing its decision to go to arbitration with Canadian company Niko Resources over Tengratila gas field blow-out compensation issues. Sources in energy division and Petrobangla said the law ministry, which approved earlier the division’s proposal for holding a local arbitration, asked Petrobangla recently to take opinion of legal experts on whether to hold the arbitration.

‘Following the instructions, the energy division asked Petrobangla last week to take opinion by two weeks of a panel of legal experts including Dr Kamal Hossain to examine whether Petrobangla should go to the arbitration,’ said a source.

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 on gas and environmental losses in the twin blow-outs at Tengratila (Chhatak) gas field in 2005. As the law ministry approved the local arbitration that 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.

The ministry initially selected the former law adviser Mainul Hosein’s firm as Petrobangla legal adviser but later selected Barrister Abdur Razzaque in June following the controversy over the selection of Mainul’s firm.

The sources said the division put forward another proposal to the law ministry for selection of an arbitrator as per the recommendation of Razzaque around two months back. ‘But without selecting the arbitrator, the ministry decided to review the arbitration decision,’ said another source. According to the sources, special adviser to the chief adviser M Tamim and energy secretary M Mohsin had already discussed the arbitration issue with law adviser AF Hassan Ariff and law secretary. When asked to comment on the arbitration issue, Mohsin said recently that it was not unusual to re-examine any decision which had great national interest.

‘We felt that the arbitration decision should be examined as we want to ensure that the national interest has been protected.’ Sources in Petrobangla and energy division, however, expressed surprise over the latest move to review the arbitration decision as it would further delay the settlement of Feni gas field issue with the Canadian company when Chittagong region needs more gas from Feni gas field.

‘The law ministry could have earlier reviewed the decision on arbitration, when the files for appointing legal adviser were sent thrice,’ observed a source. The Canadian company has reduced gas production from Feni field to only around 5 million cubic feet per day in recent times from around 20mmcfd in 2006 after Petrobangla refused to pay it for the gas of Feni field following Niko’s refusal to provide compensation for Tengratila blow-out as per government estimation. Chittagong region has been facing gas shortage because of the reduction of gas supply from Feni along with declining production of offshore Sangu field. Petrobangla claimed 8 billion cubic feet gas free of cost and Tk 84 crore in cash from Niko as compensation for the damages caused to natural gas and environment due to the twin blowouts.

It also asked Niko for a bank guarantee of Tk 200 crore for any probable loss to rest of the gas as an investigation committee forecast that the actual damage could be to the tune of 54 billion cubic feet gas.

The development of two more production wells at Feni gas field and development of Chhatak gas field got stuck because of dispute over the compensation issue. The company made its way into Bangladesh’s gas field through a controversial joint-venture agreement with Bapex for Feni and Chhatak gas-fields in 2003.

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