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

Blowout Compensation
Niko terms govt claim unrealistic

Niko Resources (Bangladesh) Ltd yesterday termed the government's demand of Tk 250 crore bank guarantee and 8.9 billion cubic feet (bcf) of gas as compensation for the Tengratila blowouts as unrealistic.

It also brushed aside the government's claim of Tk 84 crore for environmental damage, caused by the two blowouts in January and June this year in the gas field, saying that there is no provision for compensation in the Joint Venture Agreement (JVA).

Talking to a group of visiting journalists at the gas field, the Canadian company's Country Manager Brian Adolph said, "In a meeting with the government, it was agreed that the blowouts caused a loss of 3 bcf of gas in total. We may consider compensating for this loss. But we do not understand how the government got the additional figures of loss of 5.9 bcf and 45 bcf."

Energy Ministry Advisor Mahmudur Rahman however told The Daily Star that although there is no clear provision in the JVA for compensation in case of environmental damages the agreement does say that in any case of dispute between the parties it should be settled amicably through mutual understanding. All the figures regarding compensations will be made clear if Niko wants, he added.

The total possible loss could be measured only after the deposited gas is completely extracted, he said adding that a governmental committee estimated the loss at 5.9bcf at sub-surface level and a possible loss of 45bcf at the third level of the gas field, also known as Chhatak marginal gas field.

Brian said guaranteeing Tk 250 crore means freezing the money, which the company cannot afford when the government already owes a huge amount to Niko for receiving gas from the Feni gas field.

Meanwhile, Niko sealed off the first relief well at Tengratila and now is ready to go for production within six weeks of getting the government's nod, he said adding, "We are ready to have more dialogues with the government if necessary, but want its approval soon to begin operation."

He said the company has to pay 30,000 dollars everyday to the US drilling company Century Drilling for keeping its rig standby in Chittagong. It had to pay 50,000 dollars a day when the rig was in the gas field, he added.

"If the government does not allow us to go for production, we have to send the rig back to the US and it will take at least a year to bring it back. The drilling company also does not want to remain here idle with minimum payment. It benefits the company more when the rig is in use."

Responding to a question Brian said they are now confident enough that there will be no more blowout as the company now has detail knowledge on the geology of the area through a drilling done by it to acquire data well before drilling the second relief well.

The second relief well has been drilled 300 meters away from the first one, as the first one was drilled only 100 meters away from the original well, which was identified by some experts as a reason for the second blowout, he added.

On the dispute between the government and Niko about the price of gas extracted from the Feni gas field, the country manager of the company said a third party could be assigned for suggesting a price, which could talk to both the disputing parties and suggest a price without any bias.

"But we want money soon from the government for Feni gas, as we have already invested a lot of money."

Brian reiterated Niko's claim that it did not have any negligence in drilling the wells and the best proof of it is that the company is insured by Lloyd's Syndicate of UK. Lloyd's would not insure Niko if it was negligent, he said.

Mahmudur Rahman said the government has full sympathy for Niko for paying 30,000 dollars to the drilling company everyday, but it cannot do anything bypassing legal procedures.

He said Bapex board decided to seek opinion from the attorney general whether Niko could go for well development. "If the attorney general suggests that well development will not have any adverse effect on the government's claim, only then we may permit Niko to go for production," he said.