Dhaka wins compensation case against oil giant Niko

Published : Sunday, 3 May, 2020 at 12:00 AM

Shahnaj Begum

The International Centre for Settlement of Investment Disputes (ICSID) has given its verdict in favour of Bangladesh in a case against Niko for damaging a huge quantity of gas in two separate gas blowouts in 2005 due to Niko's negligence in Tengratila, Chhatak near Indian border-with a potential of 700 to 800 bcf of gas there.

The ICSID tribunal was constituted in 2010 with Michael E Schneider of Germany as its president. On February 28, it issued a decision on the compensation and on forming an independent body to assess the damage issue and submitting a report in this regard.

"It is a victory for Bangladesh in two ways-one, we proved that we were right in our position seeking the "compensation" and we could be able to get our compensation, which would be around $ 1, by virtue of the verdict of ICSID," a senior official of Petrobangla told the Daily Observer on Saturday.

State Minister for Power, Energy and Mineral Resources Nasrul Hamid said, "We will hold a press conference in this regard tomorrow (Sunday).

On January 7 and June 24, 2005, two explosions caused a colossal damage of property and environment in the adjacent areas of Chhatak Gas Field due to Niko's negligence while digging pits.

Following the incidents, a government-formed probe committee held Niko responsible for the blowouts and estimated the damage caused. On June 15, 2008, a case against Niko was filed with the Dhaka District Judge's Court seeking Tk 746.5 crore in compensation. The proceedings of this trial are still pending.

Niko brought the case to the ICSID Tribunal, asking whether they should pay any compensation and sought a declaration that it was not liable.

In the second suit, Niko demanded $35.71m from Petrobangla as payment of gas sales from the Feni gas field. The amount includes $8.55m that Petrobangla owes to Bapex, according to the joint venture agreement.

Petrobangla refrained from making any payment to Niko following a High Court order unless the company paid the compensation for the Tengratila blowouts. However, Bangladesh Environment Lawyers Association (Bela) filed the case against the Canadian company challenging the deal.

ICSID passed its sentence in a case out of two about 'gas bills' and 'compensation in Tengratila gas explosion at Chhatok gas field' that were filed by Niko in 2010 challenging a case filed by Bangladesh seeking stay order on paying gas bills and to realise compensation.

State owned Oil and Gas Corporation, Petrobangla filed a case against Niko seeking Tk 746.50 crore as compensation for the damage caused by the explosions.

Refusing to pay the compensation, Niko in 2010 filed two cases in ICSID challenging the case filed by Bangladesh to realise compensation and seeking stay order on paying gas bills.

Earlier, ICSID tribunal in their Third Decision on the Payment Claim, after the fullest consideration of the Respondents' application of March 25, 2016, ordered: (1) Petrobangla shall pay to Niko forthwith USD 25,312,747 and BDT 139,988,337, plus interest (a) in the amounts of USD 5,932,833 and BDT 49,849,961 and (b) as from September 12, 2014 at the rate of six month LIBOR +2% for the USD component and at 5 per cent for the amount in BDT, compounded annually. It also said Niko cannot sell their property without Bangladesh government order but it did not say anything about the compensation issue pending since 2017.

Earlier, the Canadian government proved that Bangladesh's two 'marginal' gas fields, Chhatak East and Feni was handed over to NIKO through an unauthorized deal, through corruption during 2002-2006.

In 2011, Niko pleaded guilty in a Calgary courtroom to bribing a Bangladeshi government minister with a luxury SUV and trips to New York and Calgary in the wake of the 2005 blowout. The company agreed to pay a $9.5-million fine.

The Anti-Corruption Commission filed two cases with the Tejgaon police on December 9, 2007 - one against Awami League President Sheikh Hasina, now the Prime Minister, and eight others and the other against former prime minister Khaleda Zia, also the Bangladesh Nationalist Party chairperson, and seven others - accusing them of causing huge losses to the state by awarding Niko two gas fields declaring them abandoned.

However, on March 11, 2010, the High Court quashed the case filed against Sheikh Hasina and six others. The case against Khaleda Zia and several others is pending with a Dhaka Special Judge's Court.

The Canadian firm stopped gas production from the Feni field in May 2010.
In 2011, a Canadian court convicted Niko of bribing Bangladesh's former minister for energy and mineral resources, AKM Mosharaf Hossain, with a Toyota Land Cruiser valued at US$188,000 and other "non-business-related" expenses.
Previously Dr Kamal Hossain conducted cases against Chevron and Scimitar. Bangladesh won both the cases.