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Dhaka Tribune

Bangladesh takes another step towards realizing Niko damages

An international court found the Canadian company responsible for the incident

Update : 03 May 2020, 05:11 PM

Over 15 years into the Chhatak gas field blowouts in Sunamganj, Bangladesh has finally won an arbitration lawsuit against Niko Resources (Niko). An international court found the Canadian company responsible for the incident.

On 28 February this year, the tribunal formed under the World Bank’s International Centre for Settlement of Investment Disputes (Icsid) found Niko liable for the blowout as the drilling was being carried out under its arrangements and supervision.

It also ordered Niko to compensate the state-run Bangladesh Petroleum Exploration Company, better known as Bapex, for the direct loss and damage caused by the blowouts.

The compensation owed by Niko to Bangladesh Petroleum Exploration Company includes the gas that escaped from Chhatak 2 Well, says a statement obtained by Dhaka Tribune.

The identification of other losses and damages that Niko must compensate, and the quantum of such compensation, is to be determined at the next phase of the pending arbitration case, the statement adds.

Niko, the tribunal said, was liable because of its failure to conduct operations diligently and in conformity with the standards of the international petroleum industry.  

In mid-2014, Icsid barred Niko from selling assets in Bangladesh without government permission until the settlement of a lawsuit the Canadian company had lodged in 2010 at a local court.  

State Minister for Power, Energy and Mineral Resources, Nasrul Hamid, disclosed the latest development in an online media briefing on Sunday. 

He hoped the compensation would be over $1 billion due to the damage caused to properties and gas reserves in and around the gas field, named after the Tengratila neighbourhood.

However, it may take until mid-2021 to estimate the extent of the losses incurred in the blowouts, the first of which occurred on January 5, 2005, and the other 19 days later.

Moin Ghani, counsel for Bangladesh Oil, Gas and Mineral Corporation (Petrobangla), said the verdict will pave the way for the government to realise compensation from Niko, but the presenting of the estimate of losses to the tribunal may take around a year.

“The next hearing was scheduled for September-October this year, but this might be deferred owing to the Covid-19 pandemic,” he feared. 

Anisur Rahman, senior secretary to the Energy Division, said it will not be possible to realise compensation from Niko as the company has already been declared bankrupt. 

“Bangladesh’s benefit in winning the case is that the country would not need to pay Niko $30 million against the purchase of its share of gas,” he said, adding that Bangladesh has also seized Niko’s resources at gas block 9, which the company will not be able to sell following this verdict. 

The energy company was trying to sell block 9 to a third party, but the Bangladesh government seized the resources, he said.

The blowouts and their aftermath    

Niko was awarded the right to develop the Chattak gas field in 2003. While drilling its first well, it caused a major blowout that resulted in damage to the gas field, the environment and the surrounding area, including the Tengratila neighbourhoods. 

A second blowout occurred when Niko attempted to drill a relief well to plug the blowout. 

On 15 June 2008, Petrobangla instituted a lawsuit seeking Tk746.5 crore in compensation from Niko. 

In another case filed by the Bangladesh Environmental Lawyers Association, the High Court ordered Petrobangla to suspend its payment to Niko for purchasing gas from the Canadian company's Feni gas field.

Niko had moved the Icsid, challenging both the cases in 2010, denying its responsibility for the blowouts.

According to eyewitnesses and locals, hundreds of flower and vegetable plantations, as well as ponds spanning 3,000 acres of land, were destroyed by the blowouts. 

An excessive amount of the toxic chemical arsenic was found in the drinking water of deep tube wells near the gas field. 

Nearly ten villages in the Tengratila, Ajabpur, Girishnagar, Islampur, Bhujna, Alipur, and Shantipur areas, were damaged in the ensuing fire. Since then, villagers have been experiencing various ailments such as breathing difficulties, heart disease, and dermatitis. 

Even after so many years, bubbles can still be seen coming out of the water in some ponds of the adjacent areas. Alarmingly, many families are using unsafe local methods to use the gas that is leaking.

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