Bangladesh Wins $42m Arbitration Award Against Niko

An international arbitration tribunal has ordered Canadian energy firm Niko Resources to pay $42 million in compensation to Bangladesh over the gas field blowouts at Tengratila in Chhatak in 2005.

The ruling by the International Centre for Settlement of Investment Disputes (ICSID) was received by the government through official channels a few days ago, Petrobangla Chairman Rezanur Rahman said.

Calling it a state-level matter, he said once the full verdict is received, it will be forwarded to the Attorney General’s Office for legal opinion before deciding the next course of action.

Although Bangladesh had claimed close to $1 billion in damages, the tribunal awarded a much lower amount. Officials said Petrobangla has so far received only a summary of the verdict, and the issue was discussed at a recent Bapex board meeting.

In 2003, Niko Resources (Bangladesh) Ltd, a subsidiary of Canada-based Niko Resources, entered into a joint venture agreement with Bapex to develop gas fields in Feni and Chhatak. Under a separate deal, Petrobangla agreed to purchase gas produced from the Feni field.

The project faced a major setback when a drilling well at the Tengratila gas field blew out in January 2005, followed by another explosion in June the same year. The incidents caused extensive damage to the gas field, loss of lives and severe environmental harm.

A government investigation later identified serious flaws in Niko’s drilling operations, prompting Petrobangla to file a case in a Bangladeshi court seeking compensation.

Bangladesh claimed $118 million in damages for Bapex and a further $896 million for the government, citing destruction of natural resources, environmental damage and wider economic losses caused by the blowouts.