Sunday, January 09, 2005

Welcome to the Banana Republic of Bangladesh!

Another day, another exploding gas well. Niko Resources, a questionable gas company whose political connections alone enabled it to drill in Bangladesh, has just had a well explode on it. Hardly surprising, considering that the same thing happened to Occidental a few years ago, and Occidental is one of the bigger, more professional oil multinationals. Niko Resources on the other hand was initially disqualified from bidding for gas blocks in Bangladesh, presumably because the government gas department, Petrobangla, thought they were too small and inexperienced an outfit.

But according to today's Daily Star, Niko was ultimately given permission to drill without even signing the standard Production Sharing Contract that other gas companies have to agree to. All thanks to influence peddling behind the scenes. Here's how the Daily Star put it:

In a further twist, it is alleged that the gas field itself was arbitrarily given to Niko in October 2003 violating government rules. Niko... had deployed a drilling company which is represented by a top leader of a certain bhaban. It is alleged that this person had earlier forced Petrobangla to award it this gas field... through a joint venture with Bapex. Once considered by Petrobangla unsuitable for gas exploration, Niko is the only foreign oil company to operate in Bangladesh without any Production Sharing Contract (PSC). Niko was given this field despite it having been ring-fenced for future operations by Petrobangla, and US company Unocal had the first right to get exploration right as it operated in that area. The oil company was disqualified by Petrobangla's evaluation in the second round block bidding in 1997.

The Daily Star report also mentions the previous gas explosion that Occidental was responsible for (not that it cost them anything of course):

The US company Occidental was found responsible for the Magurchhara explosion, but the company was allowed to sell out its concerns to Unocal and leave Bangladesh in 1999 following an extension of its PSC through a supplementary contract. Petrobangla demanded $685 million in compensation for damages from Unocal in 2002, but Unocal so far has not paid anything. Instead the company claimed that the compensation has been "paid" through the supplementary contract."

Well, this is just wonderful. If you give a contract to an oil company and they blow up your well, of course they should be liable. But in Bangladesh they're not, because in Bangladesh no one is liable for anything. And of course if the government gives a contract to an oil company whom they know to be incompetent, then the government should answer to the people for that when things go wrong. Particularly the responsible "top leader of a certain bhaban", even if he's the son of the Prime Minister. But of course, that will never happen.

Welcome to the Banana Republic of Bangladesh.


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