Oil, gas exploration in the Bay: Int’l tender after 8 years

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Bangladesh is finally going to float an international tender anew next week, for exploration of oil and gas in the Bay of Bengal. Several international companies have already shown interest in bidding.

Petrobangla, the state-owned agency that deals with natural gas, oil, coal and mineral resources, has invited 55 companies in the tender process.

Fuel and Mineral Resources Division and Bangladesh Oil, Gas and Mineral Corporation (Petrobangla) sources said a multi-client survey reveals that there is a possibility of gas in the Bay.

The tender is likely to be floated on 10 March, with the companies to be given six months to take part in the bidding.

Since the settlement of disputes over the maritime boundaries with neighbouring India and Myanmar, there has been no significant progress in the exploration of oil and gas in the Bay of Bengal in the last 12 years. Though four foreign companies started exploratory works, three have left the Bay of Bengal.

The last tender for offshore oil and gas exploration was floated in 2016. Though a new Production Sharing Agreement (PSC) was signed in 2019 but tenders were not called. After nearly four years, the cabinet gave final approval to the new PSC agreement in July last year. The facilities have been increased more than before to increase the interests of foreign companies.

Maritime boundary disputes with India and with Myanmar were settled in 2012 and 2014 respectively. Now there are 15 blocks in the deep sea and 11 in the shallow sea.

ConocoPhillips, an American multinational corporation engaged in hydrocarbon exploration and production, started working on two blocks in the deep sea in 2010. They conducted a two-dimensional survey but later left the work as their demand for hike in gas prices was not met.

Besides, Australia’s Santos and South Korea’s Posco Daewoo also left the work after the agreement. Indian company ONGC is now the only company exploring gas and oil in two blocks in the shallow sea. Excluding these two, tenders are being invited for the remaining 24 blocks.

Those interested

US multinational company ExxonMobil expressed interest in signing an out-of-tender contract last year. There were several discussions about this too. But it did not progress as the 12th parliamentary elections were impending.

Following the formation of the new government, a delegation from ExxonMobil came to discuss the matter again. They have been advised to participate in the tender. Petrobangla hoped they would participate in explorations in 15 deep-sea blocks.

Another American multinational company, Chevron, has been working in gas production in the country since 1995. Currently, they supply 55 per cent of the country’s total daily gas production from three gas fields in Moulvibazar and Habiganj. They are also interested in participating in offshore gas exploration. They have already purchased multidimensional survey data from Petrobangla. US company ConocoPhillips is also showing interest again.

Apart from this, Chinese company Sinopac and some other companies have been showing interest in the oil and gas exploration in the Bay.

Energy and mineral resources department secretary Nurul Alam told Prothom Alo on Wednesday that the country needs gas. It would be a big achievement if gas is found in the sea. But there is a major investment risk in offshore oil and gas exploration. That is why PSC has been updated to attract foreign companies. Bangladesh has the third most attractive PSC in the world right now. Hopefully we will get a good response this time.

Petrobangla sources said German company Schlumberger has carried out a multi-client survey to verify the initial possibility of gas availability in the sea. Any company interested in the tender can buy the information of this survey.

Besides, Petrobangla also has the data of the two-dimensional survey conducted by ConocoPhillips. The possibility of getting gas has also been seen in the Bay of Bengal. However, extractable gas reserves cannot be discovered without drilling exploratory wells. So far no well has been drilled in the sea. However, two neighbouring countries India and Myanmar have got gas reserves in the Bay.

Gas price and profit distribution

According to the PLC-2019, the price for every 1,000 cft gas extracted from the deep sea was US $7.25 and $5 for the gas extracted from the shallow sea. But the new PSC does not have any such fixed price. Instead, it has been said that the price would be 10 per cent of Brent crude oil. This means the price will go up or down along with the oil price in the global market. Currently the price of unrefined fuel oil is $80 per barrel. At this rate, the price of gas to be extracted from the Bay would be $8 per 1,000 cft.

The formula for profit distribution between the multinational company and Petrobangla has also been changed this time. Earlier, the profit used to be distributed between the two companies after curtailing the investment and operation costs. At this rate, Petrobangla used to get 55-80 per cent profit based on the amount of gas produced. An increased amount of production would enhance the profit of Petrobangla. But this time, the total revenue from the gas field will be divided between the two companies, which means Petrobangla’s profit would be between 35 and 65 per cent.

First offshore exploration tender in 1974

Energy division and Petrobangla sources said that Bangladesh called the first offshore exploration tender in 1974. PSC was signed with six companies at that time. That time, Union Gas Company, a US multinational that was later renamed as Unocal Corporation, talked about finding a gas reserve in Kutubdia on Cox’s Bazar. But all the companies left the country when the government of Khandker Mustaque Ahmad came to power. Later, a tender was invited in 1988 but none showed interest in it.

An agreement was signed with Australia’s Santos under the jurisdiction of PSC-1994. The company discovered the Sangu gas field in Chattogram. Gas was produced from the field between 1998 and 2013. The field was shut down as there was no reserve left to be extracted commercially.

US-based ConocoPhillips signed an agreement under the PSC-2008 but left the country in 2015. Santos started their operations in Bangladesh in 2012 but left the country in 2020 saying that they are shutting down business from this region. South Korea’s Posco Daewoo also arrived in Bangladesh at the same time but left the country later. Though a new Production Sharing Agreement was composed in 2019, no tender was floated that time as no company showed any interest.

Speaking to Prothom Alo, a Petrobangla official said facilities have been increased for the multinational companies as sought. The tender could not be floated as the companies did not have any interest in the previous Production Sharing Agreement. This time their interest will increase.

Experts said the government shifted focus to import of energy instead of focussing on explorations within the country. The import of LNG started from 2018 but that too was hampered due to the dollar crunch. Once again initiatives are being taken to explore gas inside the country but the bureaucratic red tape system must be slashed.

Geologist Badrul Imam told Prothom Alo world’s apex offshore gas exploration company ExxonMobil has shown its interest to work in Bangladesh. Many companies are likely to show interest since there is a good possibility of gas availability. This would be competitive as the companies will have to come through a tender. But floating the tender has been late. The government should sign an agreement without wasting any more time after completing the tender process.

* The report, originally published in the print and online editions of Prothom Alo, has been rewritten in English by Shameem Reza