Bangladesh goes to int'l court for compensation
Bangladesh has filed a case with an international arbitration court against Niko Resources Bangladesh Ltd, claiming Tk 9,250 crore in compensation for destruction of properties and gas reserves at Chhatak gas field in fire more than a decade ago.
Bangladesh Petroleum Exploration and Production Company (Bapex) approached the International Centre for Settlement of Investment Disputes (ICSID), an arm of the World Bank, in March this year.
This is the first time Bangladesh has moved to an international court to realise compensation from the Canadian oil company since the twin blowouts in 2005.
The Washington-based ICSID is an international arbitration institution that facilitates dispute resolution between international investors and host states.
Following the claim by Bapex, the ICSID issued a rule seeking explanation from Niko.
“But Niko has not yet responded,” Nasrul Hamid, state minister for power, energy and mineral resources, said yesterday.
According to energy ministry sources, Niko has to reply by July this year, and a hearing on the issue will take place at the ICSID in the last week of August.
The minister said the amount of compensation would be much higher if further assessment of the damages was carried out.
Niko entered into a joint venture agreement with Bapex on October 16, 2003 for development and production of petroleum from Chhatak and Feni gas fields.
The Canadian firm started drilling the Chhatak-2 well in December 2004 with a plan to drill three development wells in Chhatak West and one exploratory well in Chhatak East.
The Chhatak-2 well suffered the first blowout on January 7, 2005 in Tengratilla. This prompted the energy ministry to form an enquiry committee to determine the cause of fire as well as the damage caused by the blowout.
In the enquiry, the committee found that the blowout had resulted from operational failure and inappropriate casing design and held Niko responsible for the blowout.
Niko took up a programme for drilling a relief well to contain the blowout in Chhatak-2. On May 30, 2005, Niko started drilling a relief well about 91 metres west of the blown out well. While the drilling was in progress, another blowout occurred on June 24, 2005.
The second blowout took place due to the firm's lack of experience, according to officials.
In December 2005, the government demanded compensation from Niko for the damage, saying the firm has to do it either through amicable settlement or arbitration.
But Niko resorted to dilatory tactics to shirk its responsibility.
In 2008, the government filed a damage suit with a Dhaka court against Niko claiming Tk 746 crore in compensation for the blowouts. The trial is pending.
“No tangible progress has taken place in the last one decade. So, Bapex has moved to the ICSID,” said Hamid.
In 2010, Niko filed two cases with the ICSID: the first was to clear its liability for the blowouts and the second was to get arrears from Petrobangla.
Petrobangla withheld payments on purchases from a gas field operated by Niko.
Petrobangla cannot pay the money at this moment as the High Court has ordered the government not to make payment to Niko until the compensation case at a Bangladeshi court is resolved or the two parties reach an amicable settlement.
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