Vol. 5 Num 557 Tue. December 20, 2005  
Front Page

Niko pushes Bapex to okay its illegal pipeline
Negotiating gas price on its own with Lafarge

Canadian company Niko is pushing its Bangladeshi partner Bapex to approve its 19-kilometre flawed and illegal pipeline from Tengratila to Sunamganj and a $10 million development programme for the Tengratila gas field, energy ministry sources said.

At the same time, Niko is independently negotiating with multinational cement factory Lafarge for sale of Tengratila gas in future. It has proposed to Lafarge a gas sale price of $3 per thousand cubic feet (mcf).

Such gas price negotiation is the first of its kind in Bangladesh as no other oil companies, operating from the mid-nineties, are allowed to independently negotiate with a third party as gas buyers unless Petrobangla declines to buy the gas. The faulty Joint Venture Agreement (JVA) between Bapex and Niko however allows such anomaly, the sources pointed out.

Niko is also hammering on drilling two development wells in the Feni marginal gas field where daily gas production has drastically fallen in the recent months. The Canadian company and Bapex started supplying Feni gas to Petrobangla in November last year.

It has sent a proposal to the Joint Management Committee (JMC) consisting of representatives from Bapex and Niko for approval of its plans for Tengratila (officially known as Chhatak gas field) and Feni gas fields.

Tengratila field exploded twice in January and June due to Niko's gross negligence.

Niko has drafted a proposal to drill a well in Tengratila at a cost of $3 million, spend $1.7 million for site development and another $ 6 million for installing a process plant.

In addition, it is seeking post-implementation approval of its illegal 19-km pipeline costing $4 million. This pipeline was installed using Titas Gas Company's pipes, which were imported for the Dhaka Clean Fuel Project. Such gross irregularity was allowed by the then state minister (ousted later) for energy AKM Mosharraf Hossain.

No action was taken against Niko despite a series of reports in The Daily Star exposing the scam.

There is no Gas Purchase Sales Agreement (GPSA) against this pipeline, constructed a month before the second Tengratila blowout, and when the inferno of the first blowout was still on. The pipeline was constructed in the domain of the Jalalabad Gas Field Company Ltd (JGFCL) without its approval and amid its protest.

The Lafarge already has an agreement with the JGTCL for purchase of 16 million cubic feet per day (mmcfd) gas. The company is set to start production in February-March.

The JGFCL pipeline to Lafarge has a pressure of 1,000 Per Square Inch (PSI), as per the required technical specification.

“Technically speaking, the Niko pipeline is not even suitable for gas supplies from a gas field to any grid. This pipeline was meant for expanding Dhaka's clean fuel network using a pressure of 150 PSI. Therefore, Niko cannot even use this pipeline to supply Tengratila gas in future, if any,” a Titas official pointed out.

In a study on Tengratila gas field, Niko claims that this field has only 110 billion cubic feet (bcf) gas. But a 1996-97 study by Petrobangla had identified a resource base of 1.9 trillion cubic feet (tcf) there, of which 1.1 tcf can be commercially produced.

Niko also seeks approval for drilling Feni 3 and Feni 4 development wells at a cost of $8 million.

The Feni field was supplying 40 mmcfd gas from November last year. But due to Niko's flawed plan to kick-start the field's operation last year, production rate has fallen to 27 mmcfd now.

Niko now says drilling of these two wells will increase production and therefore the government can ensure better gas supplies to Chittagong region.

The JVA demands that Niko will conduct a 'work-over' in the abandoned well of the Feni field to begin gas production there. The work-over covers cleansing the abandoned well and identifying new gas zones. After the work-over, Niko is supposed to observe the gas field's performance for a year and then plan to drill new development wells.

But the company did not follow this process at all. It drilled two wells violating the JVA and from October last year it started supplying 40 mmcfd gas to Petrobangla without having any contract.

An official of the energy ministry said the Bapex is not interested in Niko's work programmes because it is trying to legalise its irregular activities. But the higher authorities have already asked Bapex to consider Niko's proposals.

Furthermore, the JVA dictates that as long as Niko keeps on making investment, Bapex will not get its free share of gas. Bapex holds 40 percent equity in the JVA.

The government meanwhile claimed 8.9 bcf gas and a bank guarantee of Tk 250 crore as Tengratila blowout compensation and for further drilling there.