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14. Contingent Liabilities
a. During the year ended March 31, 2006, a group of petitioners in Bangladesh (the petitioners) filed a writ with the High Court Division of the Supreme Court of Bangladesh (the High Court) against various parties including Niko Resources (Bangladesh) Ltd. (NRBL), a subsidiary of the Company.
In November 2009, the High Court ruled on the writ. Both the Company and the petitioners have the right to appeal the ruling to the Supreme Court. The ruling can be summarized as follows:
----------------------------------------------------------------------------Petitioner Request High Court Ruling----------------------------------------------------------------------------That the Joint Venture Agreement for The Joint Venture Agreement for Feni the Feni and Chattak fields be and Chattak fields is valid. declared null and illegal.----------------------------------------------------------------------------That the government realize from the The compensation claims should be Company compensation for the natural decided by the lawsuit described in gas lost as a result of the note (b) below or by mutual uncontrolled flow problems as well agreement. as for damage to the surrounding area.----------------------------------------------------------------------------That Petrobangla withhold future Petrobangla to withhold future payments to the Company relating to payments to the Company related to production from the Feni field production from the Feni field until ($27.9 million as at December 31, the lawsuit described in note (b) 2012). below is resolved or both parties agree to a settlement.----------------------------------------------------------------------------That all bank accounts of the Company The ruling did not address this maintained in Bangladesh be frozen. issue, therefore the previous ruling stands. Funds in the Company's bank accounts maintained in Bangladesh cannot be repatriated pending resolution of the lawsuit described in note (b) below.----------------------------------------------------------------------------
On January 7, 2010, NRBL requested an arbitration proceeding with the International Centre for the Settlement of Investment disputes (ICSID). The arbitration is between NRBL and three respondents: The People's Republic of Bangladesh; Bangladesh Oil, Gas & Mineral Corporation (Petrobangla); and Bangladesh Petroleum Exploration & Production Company Limited (Bapex). The arbitration hearing will attempt to settle all compensation claims described in this note and note (b). ICSID registered the request on May 24, 2010.
In June 2010, the Company filed an additional proceeding with ICSID to resolve its claims for payment from Petrobangla in accordance with the Gas Purchase and Sale Agreement with Petrobangla to receive all amounts for previously delivered gas.
b. During the year ended March 31, 2006, Niko Resources (Bangladesh) Ltd. received a letter from Petrobangla demanding compensation related to the uncontrolled flow problems that occurred in the Chattak field in January and June 2005. Subsequent to March 31, 2008, Niko Resources (Bangladesh) Ltd. was named as a defendant in a lawsuit that was filed in Bangladesh by Petrobangla and the Republic of Bangladesh demanding compensation as follows:
(i) taka 422,026,000 ($5.17 million) for 3 Bcf of free natural gas delivered from the Feni field as compensation for the burnt natural gas; (ii) taka 828,579,000 ($10.15 million) for 5.89 Bcf of free natural gas delivered from the Feni field as compensation for the subsurface loss; (iii) taka 845,560,000 ($10.36 million) for environmental damages, an amount subject to be increased upon further assessment; (iv) taka 6,330,398,000 ($77.53 million) for 45 Bcf of natural gas as compensation for further subsurface loss; and (v) any other claims that arise from time to time.
