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Published : 03 May 2020, 05:58 PM
The International Centre for Settlement of Investment Dispute or ICSID announced the verdict on Feb 28, State Minister for Power, energy and Mineral Resources Nasrul Hamid said in an online media briefing on Sunday.
It came after Bangladesh submitted a compensation claim worth about $1 billion based on the analysis of international experts. The tribunal said environmental and health costs must be added to the amount.
The verdict is recognition of Niko's culpability in the blowouts which resulted in massive losses for Bangladesh, said Barrister Moin Uddin, one of the state counsels.
The court also directed the aggrieved party to add to its compensation claim the damage to human health and the environment caused by the blowouts.
“We’ll go deeper into the issue than we previously had in 2016 following this verdict. We have lost a lot of data over the past decade. But we’ll try to engage international experts and figure out the environmental and health-related losses. We need to add the national loss to it,” said Hamid.
The government will enlist the services of international experts once the ongoing COVID-19 crisis ends, he said.
In 2003, Niko Resources (Bangladesh) Ltd, a subsidiary of the Canadian corporation, signed a joint venture agreement with Bangladesh Petroleum Exploration & Production Company Limited (BAPEX) to develop gas fields in Feni and Chhatak. Petrobangla subsequently agreed to buy the gas extracted from the Feni field under a gas purchase and sales agreement.
However, a drilling well at Chhatak's Tengratila gas field exploded in January 2005 and was followed by another blowout at the same place later in June which resulted in extensive damage to the gas well, human lives and the environment.
A government probe into the blowouts found fault in Niko's drilling procedure, prompting Petrobangla to sue the company for damages in a Bangladeshi court.
The state-run energy corporation subsequently stopped paying for the gas supplied from Feni in 2009 after the High Court put a freeze on all payments to Niko until the compensation claim was resolved.
But Niko instead pursued arbitration proceedings by filing two cases with the Washington-based ICSID, requesting a declaration absolving it of liability for the two blowouts and demanding payment for the gas it had supplied to Petrobangla from the Feni gas field, respectively.
Niko's claim against liability for the explosions was later dismissed by the tribunal in 2013. The following year, the arbitral tribunal also stayed its second case until the matter of compensation for the Tengratila blowouts was resolved.
Reports in the media at the time also indicated an attempted cover-up of the blowouts by the BNP-Jamaat-e-Islam coalition government at the time. Niko had reportedly given a sports utility vehicle to the then state minister for power AKM Mosharraf Hossain as a kickback.
A Niko official later confessed to the bribery and was fined 9.5 million Canadian dollars by a Canadian court.
The ICSID has now ruled in favour of Bangladesh, noting that Niko violated the terms of its agreement with Petrobangla by failing to comply with international standards in carrying out its work in the gas fields.
"There were a lot of flaws in Niko's work on the gas field. The tribunal made it clear that it failed to adhere to the international standard. This was in breach of the contract it had signed with Petrobangla or Bangladesh," said Hamid.
Bangladesh claimed losses of $118 million for BAPEX and another $896 million for the government resulting from the blowouts. An estimate of the damage to the environment and public health will now be added to the claim.
“We are still having to deal with gas leaks that stemmed from the explosion in 2005. Therefore, the amount of compensation for Petrobangla will increase further. The international experts will look into it,” the state minister added.
The government will determine the aggregate damages and report back to the tribunal in six months, said Barrister Moin. He expects a verdict to be delivered a year after the submission.
But Niko has since been declared bankrupt casting doubts over the recovery of the compensation.
Asked about the matter by reporters, Hamid said: "Bangladesh will assume complete ownership of Niko's stake in the onshore Block 9. Apart from that, their claim for $30 million as outstanding payment for the gas supplies from Feni will also be resolved. Apart from that, we will also try to recover the money by liquidating their assets around the world."
Niko has a stake of about $280-300 million in Bangladesh's Block 9, according to the state minister.
Moin pointed out that Bangladesh's compensation claim at the tribunal is likely to exceed $1 billion and that will cover the country's debt to Niko.
