A gas contract or robbery?

Nuruddin Mahmud Kamal

The Bangladesh capital Dhaka perhaps dons its corrupt hat again this month. It is eagerly waiting to sign an unusual gas-contract with a relatively unknown Canadian company, NIKO. It is in this connection I was told that an inner-wheel of the government known as Boston Mafia has all on a sudden become hyper active. They want to materialize signing of the contract even on a week end! Also to initiate this new ball game, the power lobby indurated the Energy and Mineral Resources Division to draw up a procedure for development of Marginal/Abandoned Gas Fields in Bangladesh. The actual intent of formulating the "procedure" is to process with a lighting speed the case for awarding Niko three suspended (not abandoned!) gas fields outside the purview of Production-Sharing-Contracts (PSCs), which is a clear deviation of the petroleum policy formulated in the early seventies under the umbrella of Petroleum Act, 1974.

Indeed, there is no earthly reason or urgency to handover the Chhatak, Kamta and Feni gas fields to Niko on the premise of a contentious procedure, by-passing the law of the land. The proposal from Niko is simply an unsolicited bid and none of the aforementioned gas fields are "abandoned" as per international gas field practice. Rather the operations of these gas fields are merely "suspended," perhaps due to some technical problems. Consequently, there is a scope for protest against the dangerous move for awarding contract to Niko. No protest against this heinous move was made earlier, essentially because the innocent citizens of this country did not realize the extent of conspiracies in the second-round-bidding on hydrocarbon exploration during the past three years. Even on that consideration, it is necessary that some inner stories be brought to light now for public consumption, otherwise the bureaucratic pressure to award the contract would materialize without any hurdle. Apparently, some political elements and vested business interests are quietly lobbying to fish in the turbid water of gas contracts etc. Such efforts have already created a crisis in Petrobangla, which may aggravate if the government do not intervene at this stage, and a dwarfed, motivated and unpatriotic contract like the one proposed (Niko contract) must never be signed. If anyone does, there would be bewilderment, confusion and disbelief in the system of the government.

Perhaps the most emotion charged question we may ask: Whether the authorities endeavoured to workover the shut-in well at Chhatak since 1969 or has there been any occasion to drill one or two appraisal wells in this geological structure? The answer is a big no. In fact, for some mysterious reason Petrobangla did not consider developing the one-well Chhatak field nor did they apply any modern tools and technology to upgrade the Gas-initially-in-place (GIIP) position of the field. Nevertheless, during the past three decades the Chhatak field's initial reserved figure was reviewed along with other fields by internationally reputed organizations. For instance, the World Bank financed Hydrocarbon Habitat Study (HHS) during 1986-88 and the Well Drill Study during 1989-91 respectively reviewed the data with more modern concepts and endorsed the previous reserves figure. Even the Energy Policy (1995) of the government thoroughly reviewed gas field data and established the natural gas reserves of Bangladesh, which included the Chhatak reserve figure at 1.9 TCF. It may be recalled that the field was discovered in 1959 and produced up to 1969. The reserve (proven plus probable) of Chhatak field on the basis of one well was considered to be 1.9 TCF with a cumulative production of 0.026 TCF, while the recoverable reserve stood at 1.14 TCF. The strongest part of the story is that except for one report presented by the former Chairman, Petrobangla on 15 November 2000, all other published report and study outcome categorically support the 1.9 TCF reserve figure. Let me elaborate the only exception. Former chairman Musharraf Hussain presented a paper entitled "Exploration of Hydrocarbon in Bangladesh: Prospects and Potentials" in the IECP International Seminar 2000 held in Tokyo, Japan. He stated the Gas-in-place of Chhatak at 447 BCF, while the Well Drill Report submitted on 6th November, 1991 (Review of Recoverable Gas Reserves in Bangladesh), Hydrocarbon Habitat Study Report in 1988 and the Report of South Asia Petroleum Exploration Society (SEAPEX) conference held on 4-6 April 2001 endorsed the reserved figure of around 1.19 TCF. Yet, it is indeed a pity that a former chairman of Petrobangla who accompanied the State Minister for Energy Rafiqul Islam and attended the ICEP Seminar 2000 misstated GIIP figure of Chhatak at 0.447 TCF and recoverable reserve at 0.268 TCF! Was that a genuine mistake? Some smell rat in that presentation and they contend that was the peak time for evaluating the Niko's unsolicited offer.

If we try to trace back another story we will find that in 1994, Messrs Occidental in their offer for Block No 12 indicated the potential of Chhatak that varied between 1-2 TCF. Oxy/UNOCAL, if I am not wrong, still retain the same block and are currently producing from Jalalabad geological structure discovered by Messrs Scimitar in 1988. This was illegally transferred (as a discovered gas field) during the tenure of Dr. Musharraf Hussain, former Minister for Energy in the mid 1990s. Clearly, there are two positive aspects of Chhatak field: one, it is a "discovered field" with an estimated reserve of over one trillion cubic feet (the estimated value of which would be around US $ 2.4 billion). Consequently it cannot be considered a "Marginal Field" when compared with other producing and non-producing fields such as Beani Bazar (0.243 TCF, producing), Sylhet (0.444 TCF, producing), Kamta (0.033 TCF, production suspended), Feni (0.178 TCF, production suspended), Fenchuganj (0.350 TCF, producing), Meghna (0.159 TCF, producing), Narshingdi (0.194, producing), and Saldanadi (0.200 TCF, producing). But the production of Chhatak has remained suspended for some unknown reason.

The worst part of the story is that some bureaucratic tangle is currently supporting Niko's latest proposal to include an adjacent "Chhatak (East) Prospect" on the ground of contiguity, which is untrue. Chhatak (East) is a new "prospect" and is clearly separated from the existing Chhatak field by a "fault". The prospect is believed to have higher gas potential, which is why Niko and their hidden supporters are so keen to extend their long hands to grab the prospects as well. Moreover, the high level committee, headed by the principal secretary is reportedly considering some illogical amendments to the contract submitted earlier at this fag end of the present government, which may not be beneficial for the nation.

Let's now try to understand some related issues in the Niko's offer, which is not within the frame of production-sharing contract policy. Compared to the standard stipulations of sharing gas, pre and post cost recovery under PSC, the Niko's proposal is a perpetual sharing of 60 per cent in their favour, which is simply an outrageous concept. Further, logging interpretations and recent evaluation by an external company (not Niko) indicated that in the present shut-in well two potential gas zones have not been tested, yet the estimated reserve may be considered over I TCF. Technically, Chhatak (East) is a prospect and cannot be considered marginal field. Again a significant gas field cannot be turned into a marginal field by a stroke of pen, however mighty and powerful bureaucrat one is. Notwithstanding all these, if through an unholy alliance a contract is signed, the most likely scenario would be that Niko will face the same fate as Scimitar did in the 1980s in the holy soil of Sylhet.

It is unfortunate that the bureaucracy is struggling on unlawful grounds to by-pass the "Petroleum Act" and the "Policy" on oil and gas exploration. In fact, they are also plotting to by pass the Parliament and adopting the so-called "Procedure" not "Policy". I have a feeling that this would become a legal issue the moment Petrobangla even under the pressure of Ministry of Energy reluctantly agrees to sign the contract with Niko.

The crux of the problem is that earlier Petrobangla did not find it necessary to consider the offer of Niko (in 2000) on valid grounds that Chhatak was not a marginal field. Yet, a particular bureaucrat would stop by at Petrobangla's office very frequently and try to convince the officials. The illegal pressure on Petrobangla specialists and professionals was to discover some grounds for categorising the Chhatak field as a marginal field, but all his efforts failed. Finally, he was able to influence the Boston Mafia and moved the case. This has caused great anxiety and increasing national concern. What, however, stunned the Petrobangla, the gas industry in Bangladesh, and the people is the multiple collision of bureaucracy and foreign company executives that they could so quickly create the prospect into an immediate crisis. When the nation will hear more about the inside stories, about manipulations and misrepresentation of facts, we will all be jolted out of our foam bed onto a bed of thorns.

Nuruddin Mahmud Kamal is a retired Additional Secretary.

Source: The Daily Star, Dhaka. July 7, 2001



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