Based on the findings of several probes into the blowouts, the energy ministry in a letter to Niko said 3bcf gas was lost from the surface level and another 5.9bcf from the sub-surface level in the field, also known as Chhatak marginal gas field.

The probe committees entirely faulted Niko's poor planning and operations for the two rounds of blowouts, one in January and the other in June.

Besides the energy ministry, the environment ministry too has made a Tk 84 crore compensation claim from Niko for environmental damages wrought by the blowouts.

The gas field may have lost further quantity of gas. The energy ministry's letter to Niko said the exact quantum of gas loss in the blowouts could be confirmed only by producing gas there and after exhausting the gas production zone.

A Niko study on the gas field claimed it has only 110bcf gas. But a 1996-97 study by Petrobangla identified a resource base of 1.9 trillion cubic feet (tcf) there, of which 1.1tcf can be commercially produced.

The energy ministry pointed out

that, even on the basis of Niko's study, the company should furnish the government with a Tk 250 crore bank guarantee valid until the gas production zone is exhausted. At the final stage, the exact gas loss will be calculated on the basis of hard data and if additional gas loss is detected the government will deduct its price from the bank guarantee.

"This is a good solution, because it uses solid data backed by several committee reports," noted an energy ministry official.

"This gas-for-gas formula for compensation apparently offsets Niko's threats to stop gas supplies from the Feni field," he said. "The price of Feni gas has not been fixed as yet and therefore Niko cannot argue over the claimed amount of money."

Niko last month threatened the government with shutting down gas supply from Feni field due to non-payment of arrears. Under a joint venture agreement with Bangladeshi Bapex, Niko has been supplying gas since November 2004 to Petrobangla from the previously-used Feni field without fixing a price or making a contract.

Under the influence of the then, and later ousted, state minister for energy AKM Mosharraf Hossain, Petrobangla made an illegal payment of $40 lakh to Niko's account in April last. Since then there has been no payments, as the price issue remained unresolved.

From November 2004 to April 30 last, Petrobangla received 4.6bcf gas from the Feni gas field and has consumed some 4bcf gas more since then.

It is assumed that the government's gas-for-gas compensation formula will also apply for Feni field, the sources said.

Niko is yet to respond to the government's claim.

FENI GAS PRICE DEBATE
The government's latest stand on the Feni gas field is a fixed price offer of $1.75 per thousand cubic feet or a unit of gas, said one source.

Niko had asked for a fixed unit price of $2.35 even before it started operations in Feni and has continued to do so since then.

Although Niko does not operate under any production sharing contract (PSC) and therefore does not shoulder the risks taken by a PSC operator, Niko has been trying to get a gas price as under a PSC.

The unit price of gas under a PSC ranges from $1.25 to $2.9.

“Niko did not have to invest or take risk like Cairn or Occidental-Unocal for exploration of oil and gas, since it is mainly dealing with three previously-used and one unexplored gas field. Bapex owns these resources, while Niko is the investor as a joint venture partner,” a source pointed out.

Petrobangla's initial calculation was that the unit price of Feni gas should not exceed $1.4.

Petrobangla buys gas from its affiliates like Bapex and Bakhrabad Gas Fields Limited at the 'wellhead' price, which is typically much lower than the variable sales price of $1.1 to $1.4 per unit.

AKM Mosharraf Hossain, the then state minister for energy, had been pushing Petrobangla to agree to Niko's price offer. This pressure forced Petrobangla to raise its unit price offer to $1.75.

At this point, the then state minister formed a ministry-level committee earlier this year. The committee suggested a $2.15 unit price for the Feni gas. But such a price would perpetuate Petrobangla's loss from gas purchase.

While a PSC gives Petrobangla progressively larger shares of the gas fields discovered and developed by oil companies as per a pre-set timetable, the Bapex-Niko deal is different. For instance, the actual unit price of Unocal's Jalalabad gas under a PSC is only 98 cents, because Petrobangla gets 70 percent gas free. But Petrobangla gets no free gas from the Feni field.

The joint venture agreement gives Bapex 40 percent share of the Feni gas, but the tricky deal contains many conditions for raising Bapex shares. Besides, Feni field has a small gas reserve, which may exhaust within a few years, even before Bapex gets a chance to have higher stakes, sources said.

Niko was disqualified by the government in the Second Round Block Bidding for oil and gas exploration under PSCs in 1997. But it kept on trying to enter Bangladesh's gas sector through the backdoor and finally got the access through a hush-hush joint venture deal with Bapex and also through purchase of shares of an American oil company in Block 9.