Energy division helps offshore company loot Tk 2.3b

The government’s energy division has permitted a fishy offshore drilling partnership of Tk 2.3 billion between state-run oil and gas exploration company, BAPEX and Australian company Santos Ltd.

The division did so despite being aware that there was no trace of gas in the Magnama well-2 of block 16 located in the Bay of Bengal, reveals an investigation.

BAPEX has already paid Tk 1.29 billion to Santos and the company has claimed for another Tk 1.01 billion.

And yet just after 13 days of drilling, the Australian company informed the government there was no gas in well-2, finds the investigation by reveals Prothom Alo.

Santos submitted a proposal to BAPEX in 2016 for joint gas exploration and extraction of gas.

The Production Sharing Contract (PSC) of block 16 with Santos expired in December 2014. The energy division extended the term, in violation of the rule that any contract cannot be amended after it expires.

Prothom Alo found that Santos’ proposal in January 2016 said Magnama well-2 might have gas reserves of 1060.8 billion cubic feet (BCF) at 10 different levels and 736.2 BCF could be extracted from that.

The proposal also said, Bapex has to pay drilling costs of Tk 1.29 billion for Magama-1. Santos could not find any gas after drilling the well.

BAPEX , however, formed a seven-member high-level technical committee at the time to look into Santos’ proposal. The committee submitted its report on 15 February 2016 in this regard.

The report said, Santos’ estimation about the gas reserves was not correct and there was no extractable gas in Magnama-2.

Earlier, Santos drilled another well, 2200 metres northwest of Magnama-2 finding no trace of gas. Scientifically, there cannot be any trace of gas in Magnama-2 either.

If BAPEX decided to drill the well, it would lose roughly around Tk 2.62 billion, the report said.

Later, Santos’ proposal and the report of the BAPEX technical committee saying “there is no commercially extractable gas in Magnama-2” were submitted at the 371th board meeting of Bapex Board of Directors on 24 March 2016.

Ignoring the recommendations of the committee, Bapex Board of Directors, decided to go ahead with drilling the Magnama-2 well jointly with Santos Ltd.

On condition of anonymity, an official of Bapex told Prothom Alo, five among seven members of the BAPEX simply follow the instructions of the energy division. Therefore the board does not disagree with the energy secretary, who is the chief of the energy division.

Former managing director of BAPEX, Md Atikuzzaman, told Prothom Alo over phone, “we presented Santos’ proposal at the meeting in a negative manner so that it would be rejected. We were sure that there was no gas in Magnama.  But what can we do if the energy secretary, the chairman of the board himself, approves it?”

When contacted, former energy secretary Nazimuddin Chowdhury said he could not recall anything about the matter as it happened a long time back.

Besides Nazimuddin Chowdhury, present at the meeting were former chairman of Petrobangla Ishtiaq Ahmed, additional secretary of energy division Md Ahsanul Jabbar, and the MD of BAPEX.

Santos and Petrobangla signed a sales and purchase agreement on 18 January last year.

Under the agreement, BAPEX was required to pay Santos 50 per cent (Tk1.29 billion) of its drilling costs in block-16.

Just after 13 days, on 31 January, Santos told the government that there was no gas in Magnama-2.

In the previous PSC, there were conditions for offshore companies to explore and extract oil and gas at their own expense.

The rule is, if found, the company will take a portion of gas as their extraction cost and the remaining gas will be distributed equally between the company and the host country. But this rule was not followed in Santos’ case.

These unprecedented irregularities have pitched BAPEX into debt. After all, BAPEX took a 12-year loan at a 2 per cent interest rate to pay Santos that amount. So the total dues are now Tk 2.62 billion.

Prothom Alo found that Nazimuddin Chowdhury, the then energy secretary, was involved with these illegal activities. He was also the chairman of BAPEX at the time.

Nazimuddin is retired now.

A commission of the Consumer Association of Bangladesh (CAB), presided over by Syed Abul Moksud, said in a draft report, like Niko, there has been corruption and irregularities in the Santos agreement.

Former state minister of energy, BNP leader AKM Mosharraf Hossain, played a key role in the Niko agreement. Likewise, the former energy secretary Nazimuddin Chowdhury played a leading role in the Santos agreement.

Canadian company Niko leased a gas field in Tengratila. Then it was revealed that there were irregularities behind the approval of Niko agreement.

Energy expert M Shamsul Alam, one of the members of the commission said BAPEX always knew that Magnama-2 had no gas, which is why BAPEX did not agree to drill it. Nazimuddin Chowdhury forced BAPEX to drill Magnama-2 with Santos.

“So much money was embezzled in such a unique way. ‘Corruption’ will be an understatement,” said Shamsul Alam.

*This report, originally published in Prothom Alo print edition, has been rewritten in English by Farjana Liakat.