Gazprom to drill Bhola gas wells for additional Tk 1.32b

Bangladesh is set to face losses of Tk 1.32 billion (Tk 132 crore) by awarding the contract to the Russian state-owned company Gazprom to drill three gas wells in Bhola, according to officials.

Even though Gazprom gets the contract, they do not do the work themselves. They hire the company Eriell Oilfield Services.

And now Eriell has proposed to drill the same gas fields at 24 per cent less the cost than Gazprom. If the state-run BAPEX would be given the contract, the work could be done at even less than half the price.

However, two senior officials of the energy division informed Prothom Alo that the proposal processing committee (PPC) headed by the energy secretary, on 9 September awarded preliminary approval to Gazprom to drill the three gas fields in Bhola.

The deal will be finalised once the prime minister, who also holds the office of energy minister, gives the final nod.

Gazprom will receive Tk 1.80 billion (Tk 180 crore) per well, that is, Tk 5.40 billion (Tk 540 crore) for the three wells. Yet in its letter to the government, Eriell has proposed to drill each well for Tk 1.36 billion (Tk 136 crore), totalling Tk 4.08 billion (Tk 408 crore) for all three wells.

Bangladesh Petroleum Exploration and Production Company Limited (BAPEX) spends Tk 650 million (Tk 65 crore) to Tk 800 million (Tk 80 crore) on drilling per well. BAPEX completed drilling a well this month in Srikail, Muradnagar at a cost of Tk 800 million. That means, BAPEX could drill the three Bhola gas wells for Tk 2.40 billion (Tk 240 crore). The government, by engaging BAPEX instead of Gazprom, could save around Tk 3 billion (Tk 300 crore).

It was BAPEX that discovered the Bhola gas field in 1995. The company has been producing gas from there since 2009. This gas is used in Bhola alone. Six gas wells have been drilled in Bhola so far.

The Bangladesh government from 2012 has awarded drilling contracts for 17 gas wells so far to the Russian PJSC Gazprom at a total expenditure of Tk 26 billion (Tk 2,600 crore). Gazprom used the services of Eriell to drill these wells. Gazprom does not give the contract directly to Eriell, but through Gazprom EP International, which is registered in the Netherlands. Then Gazprom International hands the work over to Eriell.

Questions have arisen concerning the manner in which the work changes hands and also about the inflated costs. Speaking over mobile phone to Prothom Alo on 17 October, energy secretary Md Anisur Rahman said, "We have known Gazprom to be the Russian state-owned Gazprom that has worked in Bangladesh so long and is about to work in Bhola too. And officials of the Russian embassy were also present during negotiations."

Eriell's proposal

Gazprom International signed a contract with Eriell Oilfield Services in 2012. Under the contract, Eriell was to drill all the gas wells awarded to Gazprom in Bangladesh. Accordingly, Eriell drilled 17 wells in Bangladesh which had been awarded to Gazprom.

Eriell's managing director Dilshod Akhmedov sent letters on 14 July to the Petrobangla chairman, the BAPEX MD and other government officials regarding the drillings of the three Bhola wells, Togbi-1, Bhola North-2 and Ilisha-1. He proposed that Eriell directly drill the wells for a total cost of USD 48 million, that is Tk 4.08 billion (Tk 408 crore). That means if Gazprom gets the contract and uses Eriell to do the work, it will skim off Tk 1.32 billion (Tk 132 crore) just as commission.

In the letter, Dilshod Akhmedov said that they realised it was important at these times to cut costs as much as possible as globally such efforts were being made to save funds in order to tackle the pandemic and the uncertain circumstances.

Earlier, in 2018, Gazprom had been awarded a contract to drill three wells in Bhola. In the last contract, Gazprom received Tk 1.40 billion (Tk 140 crore) per well. This time they have inflated this to Tk 1.80 billion (Tk 180 crore) per well. When asked about the matter, BAPEX managing director Md Ali told Prothom Alo, "We will carry out the decision taken by the government." He would not say anything more on the matter.

Changing hands

While visiting Russia in 2010, prime minister Sheikh Hasina had sought cooperation from the Russian president Vladimir Putin for the exploration and development of Bangladesh's oil and gas sector. A protocol agreement was signed at the time, where no specific Russian company was named. Russia later appointed Gazprom for the work.

On 8 August 2011, Gazprom submitted a proposal to Petrobangla for the drilling of 10 wells without tender. Under the Speedy Supply of Power and Energy (Special Provision) Act, Gazprom was awarded the contract for those 10 wells. They were later awarded contracts for 7 more wells.

Gazprom hands over all its work to Gazprom International. Gazprom International, on its website, introduces itself as the sole enterprise for implementing Gazprom's projects outside Russia.

The ministry for power, energy and mineral resources on 30 August 2018 sent a summary to the prime minister for her approval for the Russian Federation's state-owned Gazprom to drill three other wells in Bhola. Supreme Court lawyer Jyotirmoy Barua, speaking to Prothom Alo, said that BAPEX cannot give the work order to Gazprom International registered in the Netherlands if the government approval specifically mentions that the work is being granted to the Russian state-owned Gazprom. This is a violation of government order.

Two officials of the general manager level in BAPEX, told Prothom Alo that in 2016 the question had arisen about giving the work to the Netherlands registered Gazprom International while the contract had been signed with the Russian state-owned Gazprom. The BAPEX MD at the time, Md Atiquzzaman, was then removed from his post.

On 29 September and 1 October, Prothom Alo wrote to Gazprom International's managing director Sergei Tumanov by e-mail, inquiring about why the Netherlands registered company got the work for oil-gas extraction in Bangladesh. He has not replied so far. Messages were sent on 6 October and 12 October to his Whatsapp number. The messages have been seen, but he has not replied.

Professor of geology at Dhaka University, Badrul Imam, told Prothom Alo work is being given to different companies in the name of state-owned companies in the interest of commission agents. A certain group is using the Russian state-owned Gazprom as a front.

Funds for 5 wells wasted

According to a report sent to Petrobangla from BAPEX on 17 November 2016, just within a few days after gas extraction began from five of the 17 wells drilled by Gazprom, the extraction had to be halted as water and sand began to rise up. These are the Semutang 6, Begumganj 3, Shahbazpur 4, Titas 21 and Titas 20 gas wells. Gazprom had been paid around Tk 8.53 billion (Tk 853 crore) for drilling these five wells at the time. This money has been completely wasted.

BAPEX later drilled these five wells again and extracted gas. Gazprom was not held liable as the contract did not have any clause concerning accidents or such problems that could arise after the drilling. Gazprom is being awarded the contract yet again with the same conditions.

Former MD of BAPEX, Mortuza Ahmad Faruque, speaking to Prothom Alo, said the quality of Gazprom's work was not good and the wells did not yield the expected results. BAPEX can drill wells at half the cost of Gazprom and the quality of their work is good too. Neither Gazprom of any other foreign company should be awarded drilling contracts for gas wells discovered by BAPEX, he said.

*This report appeared in the print and online editions of Prothom Alo and has been rewritten for the English edition by Ayesha Kabir