Bay of Bengal offshore gas exploration tender revised to attract bidders

The government is preparing to invite international bids for offshore oil and gas exploration in the Bay of Bengal, revising key terms of its Production Sharing Contract (PSC) after a previous round failed to attract any bidders.

Officials say several incentives have been enhanced, including a higher gas price formula, in an effort to draw participation from foreign energy companies. The Energy Division believes the revised framework could improve interest in the upcoming tender.

Sources at Petrobangla said seven foreign companies had collected tender documents in the last round, but none ultimately submitted bids. Following consultations with potential bidders and feedback on the PSC, the contract was revised and subsequently approved by the Ministry of Power, Energy and Mineral Resources. The tender notice is expected to be published today, Sunday.

Bangladesh’s maritime boundary disputes with India and Myanmar were settled in 2012 and 2014 respectively, opening up vast offshore areas for exploration. The Bay has since been divided into 26 blocks — 15 in deep sea and 11 in shallow waters.

Although exploration efforts began earlier, four companies that previously entered the sector eventually withdrew without completing their work. At present, no offshore exploration activity is ongoing.

Petrobangla Director (PSC) Md Shoyeb told Prothom Alo that the revised PSC has been designed to balance investor interest with national priorities. “We have tried our best to make the PSC attractive for foreign companies while safeguarding national interests,” he said, expressing hope for stronger participation this time.

Officials said interested companies will be able to purchase tender documents from 1 June, along with seismic and survey data from offshore blocks. The deadline for submission has been set for 30 November. Around 55 companies are being directly invited via email.

Higher gas price benchmark introduced

Under PSC-2019, gas prices were fixed at USD 7.25 per thousand cubic feet for deep sea blocks and USD 5.50 for shallow waters. In PSC-2023, the system shifted to a floating model, pegging gas prices at 10 per cent of Brent crude oil prices.

The new PSC-2026 raises this benchmark to 11 per cent for deep sea blocks and 10.5 per cent for shallow waters. This means gas prices will move in line with global oil prices. For instance, if crude oil reaches USD 100 per barrel, gas from deep sea blocks would be priced at around USD 11.

To prevent extreme fluctuations, upper and lower price limits based on Brent crude will also be introduced for five-year periods.

The revised contract also allows contractors to build pipelines and recover costs through a tariff system linked to reserves, supply and infrastructure expenses — a provision absent in earlier PSCs.

Profit-sharing arrangements between Petrobangla and international contractors have also been adjusted. If exploration fails but a contractor continues operations, its profit share may increase by 1–2 per cent.

Separately, the interim government earlier reduced the contribution of foreign energy companies to the workers’ welfare fund from 5 per cent to 1.5 per cent, a move seen as another step to improve investor incentives.

Existing tax exemptions on imports will remain in place. Petrobangla will continue to bear income tax on behalf of contractors. Companies will also be allowed to sell gas to third parties domestically if Petrobangla does not purchase it, and export it if local demand is insufficient. Disputes will be subject to international arbitration.

State-owned Bangladesh Petroleum Exploration Production (BAPEX) will retain a 10 per cent stake in shallow sea blocks.

Shift toward imports

Sector insiders say Bangladesh began importing liquefied natural gas (LNG) in 2018 to address the country’s growing gas shortage, during the tenure of the then Awami League government. According to them, there was a stronger policy focus on imports than on domestic exploration.

Although a new Production Sharing Contract (PSC) was introduced in 2019 for offshore oil and gas exploration, no tender was actually launched at the time. It then took around three years to finalise PSC-2023.

Meanwhile, a multi-client 2D seismic survey covering around 12,000 kilometres in the offshore area was conducted jointly by TGS and Schlumberger, which indicated potential prospects for gas.

A tender was eventually invited in March 2024. After the political change in August, the interim government extended the submission deadline by three months. However, as no company participated, no fresh bidding round was initiated thereafter.