Gazprom given work at high cost, BAPEX deprived

The drilling of three wells in the Bhola gas field discovered by the state-owned company BAPEX is being awarded to Russia's Gazprom without a tender and at double the cost.

Gazprom will be given 21.19 million dollars (more than Tk 1.80 billion) for drilling each well. The company will carry out two explorations and drill one development well there.

If this work was done by the Bangladesh Petroleum Exploration and Production Company Limited (BAPEX), it would cost an average of 10 million dollars (about Tk 800 million) per well. The government's decision is being overlooked while awarding Gazprom the contract at such a high cost.

Gazprom excavated two wells at Shahbazpur North and Bhola East, costing 16.6 million dollars. In September 2016, Gazprom drilled wells at a lower price than this.

The Proposal Processing Committee (PPC), headed by the energy secretary, recently decided to pay 21.19 million dollars to Gazprom for drilling each well under the Power and Energy Supply (Special Provisions) Act. The decision will now go to the cabinet committee on procurement. The prime minister will then give the final approval. This was revealed by the sources at the energy division and BAPEX.

Energy experts say Gazprom was handed the contract to drill 10 gas wells in the country in 2012, but the experience was not good. Gazprom has drilled a total of 17 wells so far. All these works were awarded without tender under the emergency provisions and energy act.

The Bhola gas field was discovered in 1995. BAPEX has been extracting gas there since 2009. The gas is used only in Bhola.

Why are foreign companies being hired to drill up wells instead of the state-owned BAPEX? Can’t BAPEX do the job? In response to the question, energy secretary Md Anisur Rahman on Wednesday told Prothom Alo over phone: “I am not saying that that BAPEX would not be able to drill the wells, nor am I saying say it would be able to d so. A memorandum of understanding was earlier signed with Gazprom. So the overall matter has to be taken into consideration.”

Badrul Imam, professor of the geology department at Dhaka University, told Prothom Alo: “Handing over the responsibility of drilling wells discovered by BAPEX to Gazprom or any other foreign companies is directly against Bangabandhu's energy policy. I think this is tantamount to betrayal to Bangabandhu.”

He said, on 9 August 1975, despite having a fragile economy, Bangabandhu bought five gas fields -- Titas, Bakhrabad, Habiganj, Rashidpur and Kailastila -- from the multinational company Shell Oil. In spite of increased use consumption over more than four decades, these gas fields still provide 31.44 per cent of the country's total fuel supply. Bangabandhu's energy policy was to make a self-reliant Bangladesh and now these resources are being handed over to foreign hands depriving local institutions.

Prime minister Sheikh Hasina is also the minister of power, energy and mineral resources. The two divisions of the ministry have provisions to seek permission from the prime minister as energy minister before taking any final decision on power and energy. A summary was prepared for the prime minister on 30 August 2017 on the drilling of the three wells by Gazprom. A week later, the prime minister signed it.

Although the summary mentions the issue of drilling wells at reduced costs, this is being overlooked now.

Energy experts say despite the prime minister's written recommendations to drill wells at a reduced price, raising the cost to $21.19 million dollars from the previous $16.6 million means that the government officials are not following the prime minister's instructions.

Asked about the matter, energy secretary Md Anisur Rahman on Wednesday told Prothom Alo over phone: “The prime minister did say that, but the reality must be taken into consideration. Gazprom drilled wells in 2016 for 16 million dollars. This is now 2020. Almost four years have passed and so this price is not really that high. Apart from that, there is high gas pressure in the field where Gazprom are going to work.”

However, professor Badrul Imam said that overstepping the written decision of the prime minister is unacceptable. Foreign companies can be given jobs, for example, in the hilly areas of Chittagong and in the sea, where BAPEX has no experience. In that case, BAPEX can also work as a partner to gain experience.

Energy secretary Anisur Rahman claimed that Gazprom was not given the drilling work at a higher price compared to BAPEX. According to him, the average cost of digging 20 wells by the BAPEX from 8 March 2013 to 10 November 2014 was 17.82 million dollars (around 1.5 billion taka).

However, Prothom Alo found different picture. In fact, out of 20 gas wells, Gazprom drilled 17 of them as a contractor without any tender. Out of 17 wells, 5 were later clogged with sand and water. These are wells 20 and 21 of Titas gas field, Semungtang 6, Begumganj 3 and Shahbazpur 4. BAPEX later re-excavated the five wells. This information has been extracted from a report submitted to Petrobangla by the then managing director of BAPEX on 17 November 2016.

Several BAPEX managers on condition of anonymity told Prothom Alo that five of the 10 wells dug by Gazprom in the first phase were congested after a few days. BAPEX later re-excavated the wells and extracted gas. The cost of drilling the well, which was damaged due to Gazprom’s fault, cost a bit more for BAPEX. There is no example that BAPEX charged more than Tk 700 to 800 million for drilling. Most recently, the preliminary excavation at Srikail East has been completed by BAPEX during the pandemic at a cost of Tk 800 million.

Gazprom is getting an average of $21.19 million for each well drilled. After reviewing Gazprom's proposal, it was found that the company has charged $1.35 million to transport the drilling rig from one place to another in the country. Gazprom will use the rig from Uzbek company Ariel Corporation.

At the moment, the Ariel rig is located at Shahbazpur North-1. Gazprom previously worked there. The rig will be taken to Bhola North from there. The distance of this path is only two kilometres. The rig will later be taken to Shahbazpur Ilsha, 10 kilometres away. From there, it will be taken to Bhola Togbi, which is 25 kilometres away. Gazprom will take $1.35 million to move the rig each time. It will charge $3.26 million to take back the rig.

Energy division officials say it's not just unusual, it’s unrealistic.

*This report, originally published in Prothom Alo Bangla edition, has been rewritten in English by Toriqul Islam.