Niko is pushing a Gas Purchase Sales Agreement (GPSA) outlining a gas tariff of $2.75 per thousand cubic metres (or one unit) that equals the price of gas from offshore Sangu field, sources said.

But in Sangu operated by British company Cairn, Petrobangla gets 50 percent gas supply free of cost as 'profit share'. This is not the case with Feni gas field from where there will be no supply of gas for free. Petrobangla also pays high price of gas from US company Unocal's Jalalabad gas field but gets between 70 and 80 percent gas free of cost as profit share.

Petrobangla sees no reason for paying such a price for Feni gas, also in dollars, and bearing losses especially when Niko is just a partner of Bapex and is not a PSC holder.

Petrobangla believes a tariff of $1.4 should be more than enough for Feni gas. This offer is already much higher than what Bapex usually gets but Niko turned it down.

The energy ministry has formed a committee headed by its additional secretary to fix the gas price.

Well-placed sources said a former energy secretary and a top bureaucrat on contract job are lobbying for Niko, backed by a state minister.

Earlier this year, Niko and Bapex struck gas in Feni gas field, once used and abandoned by Petrobangla. "It is a small reserve with less than 100 billion cubic feet (BCF) reserve," said an industry insider. "It can produce up to 15 million cubic feet of gas a day. Gas can be supplied from this field within a few months as necessary infrastructures are nearly ready."

Petrobangla buys gas from its affiliates like Bapex or Bakhrabad gas field at 'well-head' price, which is much lower than its variable sale prices of $1.1 to $1.4 per thousand cubic metres.

But it buys gas from foreign oil companies at high prices between $2.9 and $1.4 on the basis of an international formula outlined in the PSCs.

Under this formula, Petrobangla is now buying gas from Cairn and Unocal from Sangu and Jalalabad gas fields at around $2.8 to $2.9. But the impact of this high price is not felt as Petrobangla gets huge gas free of cost as profit share.

"But we don't have any profit share in Bapex-Niko's gas. The deal is with Bapex and Bapex is already benefiting Niko by giving it free access to these gas fields," said a Petrobangla official.

"We are supposed to buy Feni gas just in the same formula applicable to other gas producing companies. There is no government obligation to pay Niko a discriminatorily higher price," he added.

The government had disqualified Niko in the Second Round Block Bidding for oil and gas exploration under PSCs in 1997. But it allegedly kept on trying to enter Bangladeshi gas sector through back-door and finally got access to the sector through a hush-hush joint venture deal with Bapex and also through purchasing shares of an American oil company in Block 9.

Last year's deal with Bapex allows Niko's access to three marginal or previous gas fields and one unexplored gas field. This deal was made violating the government policy that an unexplored gas field will be given to foreign oil companies through competitive bidding if it is not reserved for the future. The joint venture deal also helped Niko avoid a competitive bidding. But Niko wants incentives and benefits received by competitive bidders who signed PSCs.