In addition, the state minister--who was forced to quit for receiving a car worth Tk 1 crore from Niko--was pushing Petrobangla to agree to pay Niko $2.35 for per thousand cubic feet of gas (or an unit).

Petrobangla had been saying Niko's gas should not cost more than $1.4 per unit. But under pressure from the minister who was more eager to help the foreign oil company than his own domain, Petrobangla pushed its own offer up to $1.75 per unit.

Mosharraf and Niko's pressure led the energy ministry to moderate a price for the Feni gas. The ministry even tried to impose a price of $2.15 per unit, sources said.

Petrobangla is yet to sign any agreement as this will lead to perpetual loss. Petrobangla's bulk sale price of gas is $1.2 per unit.

While Petrobangla kept on resisting Niko's price offer, late last year Mosharraf Hossain ordered it to take Feni's gas to tackle a gas supply crisis. Petrobangla started purchasing Feni's gas from November, initially at a rate of 20 million cubic feet per day (mmcfd). By January, Niko's supply increased to 40 mmcfd.

Till April 30 from November last year, Petrobangla purchased 4.6 billion cubic feet (bcf) gas from Niko-Bapex. According to Petrobangla calculations, if it is forced to accept Niko's price, it will incur more than $4 million loss by paying for the 4.6 bcf gas.

If the gas price is fixed at $1.4 per unit, Petrobangla will have to pay $6.44 million; if the price is $1.75, the bill comes at $8.05 million; against $2.15, the bill stands at $9.89 million; and if the price is set at $2.35, the bill will amount to $10.81 million.

After Niko's incompetence and negligence led to the Tengratila gas field blowout in early January this year--the Canadian company started putting pressure on the payment for its gas. In March, when the country was undergoing tremendous gas crisis, Niko threatened to snap gas supplies unless it is paid $5 million. Petrobangla paid it $2 million under pressure from the minister.

Within one month, Petrobangla once again faced pressure to pay Niko another $2 million.

Niko, which got access to the Feni marginal gas field through a controversial joint venture with Bangladesh Petroleum Exploration company (Bapex), keeps on relentlessly hammering on making Petrobangla sign an unusual Gas Purchase Supply Agreement (GPSA).

When it was developing the Feni field last year, it had initially asked for $2.75 per unit--a price close to that of the off-shore Sangu field, which is the costliest in Bangladesh.

However, Sangu's gas is produced under a Production Sharing Contract (PSC) with Cairn in which Petrobangla gets more than 55 percent gas for free plus it has paid back the major chunk of Cairn's investment. As a result, the practical price for per unit Sangu gas is $1.45.

The per unit practical price of the Jalalabad gas, which is also under a PSC with Unocal, is even cheaper now--only 98 cents. Petrobangla has completely paid back Unocal's investment and now has more than 70 percent share of this field.

But Feni gas field gives Petrobangla no free gas as this is not under a PSC.

Under the Joint Venture Agreement, Bapex gets 40 percent share of Feni's gas. But, the agreement is designed in such a way that for the first 10 years, Bapex gets no cash benefit. Bapex's 40 percent share of gas will be used for Niko's cost recovery.

Again, as per the agreement, Bapex is supposed to buy Niko's gas and sell it to Petrobangla although the arrangement did not take place.

In early 2004, Niko and Bapex struck gas in the Feni gas field, once used and abandoned by Petrobangla. It is a small reserve with less than a hundred billion cubic feet reserve.

Petrobangla buys gas from its affiliates like Bapex or Bakhrabad gas field at "well-head" price, which is typically much lower than its variable sale price of $1.1 to $1.4 per unit.

Petrobangla presently spends around $14 million to purchase 340 mmcfd gas from Sangu, Jalalabad and Moulvibazar fields under different PSCs. The Jalalabad field has a proven reserve of 1.6 trillion cubic feet (tcf) while Sangu has about 800 bcf and Moulvibazar field has 440 bcf.

Mosharraf previously masterminded the Kafco agreement with Japanese Marubeni-led consortium under which Bangladesh heavily subsidised gas supplies to Kafco incurring hundreds of crores of taka loss.

Niko disqualified in the Second Round Block Bidding for oil and gas exploration under the PSCs in 1997. But it kept on trying to enter the Bangladeshi gas sector through the backdoor and finally got access to the sector through a hush-hush joint venture deal with Bapex and also through purchasing shares of an American oil company in Block 9.

The last year's deal with Bapex gives Niko access to three marginal and one unexplored gas fields. The deal violates the government policy that an unexplored gas field will be given to foreign oil companies through competitive bidding if it is not reserved for the future.

The joint venture deal also helped Niko avoid a competitive bidding. But Niko wants incentives and benefits received by competitive bidders who signed PSCs.

MOSHARRAF'S COMMENTS
AKM Mosharraf Hossain last night said when the agreement was signed, they just approved it. The parties involved in the agreement did not fix the gas price.

"Niko claimed $2.35 per unit but we offered a price of $2.10," Mosharraf told The Daily Star. "We also formed a committee to determine gas price. The committee is still working but could not yet fix the price," he added.

The former state minister said they asked for gas from the Niko field after a gas crisis emerged. Niko in a letter said it would accept whatever price is fixed through mutual negotiation. "Then we agreed to purchase gas on the basis of that letter."

Niko started supplying gas and at one point asked for payment. "Then I asked Petrobangla to make advance payment at the rate of $2 per unit, which was lower than our earlier offer of $2.10. So there is no question of raising any allegation against me," Mosharraf said.

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