Niko Scam Revisited


Published on August 29, 2017
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Bangladesh High Court has declared contracts between Petrobangla & Niko and BAPEX & Niko illegal in a historic verdict recently taking into cognizance the allegations of a scam in the award of a contract. The contracts were concluded by BNP Jamat Alliance Government in 2003 for re-development of Feni and Chattack gas fields including Chattak east structure.

The verdict also directed government annex all assets of Niko Resources Bangladesh and Niko Resources Canada in Bangladesh and put on hold all payments to them till other cases of claims against them for the gross negligence leading to two major blow outs in Tengratilla while exploring for gas are disposed of. The writ was raised by Dr. Shamsul Alam, advisor consumers association of Bangladesh. BNP Jamat government in 2003 made Petrobangla and BAPEX entering into two contracts for the development of Feni and Chattack fields based on their unsolicited offers. Niko further developed Feni field and started supplying gas to national grid operated by GTCL. But the gas supply to Feni was also suspended following disputes surfacing after two successive blow outs in Tengratilla (east Chattack).

Petrobangla raised a legitimate claim against Niko for alleged negligence. The payment to Niko for gas sales to Petrobangla was suspended. Later the matter went to arbitration. Petrobangla lost and was asked to pay Niko the outstanding dues along with interest. In the meantime, the scam allegation against Niko Resources, Canada was also disposed after Niko admitting of procuring the contract through bribing. The verdict under discussion brought into reference the acknowledgment of bribing in getting the contracts by Niko Canada.

Looking Back in Retrospect:

Niko Resources submitted an unsolicited offer to the then Ministry of Power, Energy & Mineral Resources in the late '90s for re-development of three Petrobangla owned gas fields Feni, Kamta and Chattack during the tenure of Bangladesh Awami league led government. Niko was not among those IOCs considered for award of some exploration blocks through formal PSC block bidding. The Kamta gas field near Dhaka was almost depleted, Feni gas field originally developed by BGSL was under the ownership of BGFCL, Chattack was under the ownership of SGFL. Petrobangla from the very outset strongly opposed the idea. Experienced petroleum engineers and reservoir specialists could not accept considering Feni and Chattack including unexplored Chattack east ( Tengratilla ) as marginal fields. The hotly debated issue led government adopting a strategy for inviting SWISS Channel method of bidding in which bids are invited from bidders for matching the offers of a bid at hand for assessing its competitiveness. Awami League Government did not take any decision about Niko offer neither did the Care Taker Government. There was virtually no action on it even during the first two years of BNP-Jamat alliance rule till 2003. A vested energy syndicate made hectic parleys. But in the meantime actions were taken for converting BAPEX into an exploration and production company setting the ground for making BAPEX a partner of Niko. The fields were taken out from owners and operators. Despite strong pressure, BAPEX and Petrobangla did not agree to consider Chattack east (Tengratilla) as marginal field as no exploration even was carried out there. However, Barrister Moudud Ahmed owned law firm in a strange legal opinion termed Chattak east as the same structure of Chattack. The government made Petrobangla and BAPEX sign two different contracts with Niko for re-development of Feni and Chattack fields.

Niko could successfully carry out drilling of some new wells in Feni and recommence production from Feni. But their incompetent drilling operation led to two major blow outs in Tengratilla. The second such incident happened few days after state Minister Energy AKM Mosharaf Hossain was forced to resign for bribing allegation by Niko. Mahmudur Rahman just took over as Energy Advisor to Prime Minister Khaleda Zia. Following the second blow out the probe committee found clear negligence in drill planning and execution of incompetent Niko. The claims were raised against them and payments for gas already sold to Niko were withheld. The issue went to arbitration. In the meantime, a separate case was filed in a Canadian court for alleged corruption in procuring the contract. Petrobangla lost the case of withholding payments for gas sales and purchase from Feni Gas field and was advised to pay Niko along with interests accrued. But allegation against Niko for procuring the contracts through bribing was proved in the Canadian court after the company representatives acknowledged the incidents of bribing. Bangladesh High court verdict declaring contract as illegal used the decision of Canadian court as a reference.


The historic verdict paved the way of further probing into the scam. The mischief mongers must be brought to law and justice must be done. At the same, all other major acts of corruption in the gas and energy sector may be revisited. These should include SAIPEM Syndrom, Scimitar Scandal, PSC to Occidental through which a Petrobangla owned Jalalabad Gas Field was handed over, Issues related to Chevron Operation in Bangladesh and similar other controversial contracts. 
The verdict has created an opportunity for Petrobangla and Bangladesh in taking over the ownership of these fields and plan exploration. Gas from Feni field would be welcome relief for gas starved Chittagong region. Experts believe that there is a huge possibility for finding significant gas reserve in Tengratilla,. But for that, the post blow out situation needs expertly assessed and evaluated.


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