Niko strikes initial deal to sell Feni gas at $1.75 per unit

Breaking a long stalemate, Niko Resources Monday entered into an initial deal with the government on the sale of its gas from the Feni Gas field. As per the initial deal signed ahead of the Gas Purchase and Sales Agreement (GPSA) with the state-owned Bangladesh Petroleum Exploration and Production Company (BAPEX), the government will purchase gas from Niko''s Feni Field at US$ 1.75 per 1000 cubic feet (mcf). However, the signing of the final GPSA is subject to getting the Energy Ministry''s nod and the completion of vetting by the Law Ministry. Niko country manager Brian Adolph, BAPEX managing director Jamaluddin Ahmed and senior general manager of Petrobangla Jahangir Kabir initialled the deal for their respective sides at a function at Petrobangla office. Petrobangla chairman Mosharraf Hossain Bhuiyan and other senior officials were present. Niko has developed the Feni gas field under a joint venture with the BAPEX, a subsidiary of the state-owned Petrobangla. The Canadian company started production at the Feni field in November 2004 and has so far produced about 15.5 billion cubic feet (bcf) of gas. But due to a discord over the price of gas, the Feni field operator has been supplying gas to the government without the cover of any agreement considering the heavy domestic demand. At one stage, responding to a request from Niko, the government paid US$ 4.0 million to the Canadian operator on an interim basis without fixing the price. From the very beginning of production at the Feni field, Niko was insisting on a price of US$ 2.75 per mcf and then proposed $ 2.35. But the government remained firm to fix the price at $ 1.75 per unit. The Niko finally accepted the government offer and signed the initial deal. According to the joint venture agreement (JVA) with BAPEX, Niko will be 80 percent owner of the field''s production until the recovery of cost while the government will get 20 percent. After the cost recovery, Niko will be owner of 52 percent of the output and the rest 48 percent will go to BAPEX. Niko country manager told UNB that as per the price fixed in the initial deal, his company now owes about US$ 17.7 million from the government on account of gas sales from Feni field. He mentioned that Niko has so far invested US$ 50 million to develop the Feni and Tengratila gas fields. BAPEX managing director said that through this initial deal, the government has successfully resolved the gas price issue with Niko .

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