Home ›› 15 Feb 2022 ›› Front
The Bangladesh government launched multiple initiatives over the past seven years to extract offshore gas with the help of international oil and gas exploration companies (IOCs), but so far without any success.
To overcome this setback, state-run Bangladesh Oil, Gas & Mineral Corporation – also known as Petrobangla – is working to amend the Production Sharing Contract ( PSC) to hike offshore gas prices to attract more IOCs, said General Manager (PSC) Shahnawaz Parvez of Petrobangla’s Blue Economy Cell.
Several other Petrobangla officials said the price of extracted gas could go up from $7.25 to $9 per cubic metre in the upcoming Model PSC, and despite the increase, the gas will be much cheaper that importing LNG from abroad.
As part of the move, a foreign consultant will be appointed within the next two months in this regard, and the revised model PSC will be available within the June-July period this year, they added.
Offshore gas exploration and extraction is a very expensive and highly technical endeavour, and Bangladesh Petroleum Exploration and Production Company Ltd (Bapex) does not have this capability. The government has a policy called the PSC for this purpose.
The policy sets the cost of exploration, sharing, and gas price with foreign companies, and it has been amended several times since 2009 to attract foreign oil and gas exploration companies in Bangladesh.
Under the existing Model PSC introduced in 2019, the price of offshore gas has been fixed at $7.25 per cubic metre. Bangladesh will get 60 per cent of the extracted gas, and the contractor will get the remaining 40 per cent – which Bangladesh will have to buy at the fixed price.
A contractor takes care of all expenses centring gas exploration, survey and drilling as part of the PSC.
3 firms left after survey
Fighting in the International Court of Justice, Bangladesh settled maritime disputes with Myanmar in 2012 and India in 2014. Bangladesh currently has an offshore area of 200 nautical miles or around 1.21 lakh square km.
This large maritime region is divided into 26 blocks based on resources. Of which, 11 are in the shallow sea and another 15 are in the deep sea. India and Myanmar have already begun extracting gas for their maritime boundary, but Bangladesh is yet to begin this process.
ConocoPhillips, a US oil and gas company, leased Blocks 10 and 11 in the deep sea in 2008 under the PSC. They carried out a two-dimension seismic survey in up to 5,060 kilometer region in two years.
The company left in 2014 after discovering the possibility of extracting two TCF gas, following a disagreement with the Bangladesh government about gas price. Santos left in 2020 after conducting a two-dimensional seismic survey of 6,662 km in the 11th block of the shallow sea.
Meanwhile, South Korean company Posco Daewoo left last year due to disagreements over raising gas prices after conducting a two-dimensional seismic survey of up to 560 km in Block 12 of the deep sea.
Though these companies left, they had submitted their survey data to Petrobangla. Officials say the information will be provided to any IOC interested in leasing the abandoned blocks, and this leverage could also trigger interest among such companies.
‘An expensive endeavour’
Commenting about feasibility and costs, General Manager (PSC) of Petrobangla’s Blue Economy Cell Shahnawaz Parvez said, “POSCO and Conoco had found the possibility of extracting 2 TCF of gas each of three surveyed blocks. This is an expensive endeavour.
“It takes $25 million to dig a gas well on land, $40-45 million in shallow sea and 80-90 million in deep sea. It also costs $10 million to carry out a 2-D seismic survey. Posco and Santos left after spending at least $130 million because they thought their profits would not be adequate.”
A senior official of Petrobangla, on condition of anonymity, said, “Pre-funding is required for a multi-client survey. The IOCs are supposed to pay tendered survey companies for this purpose.
“However, exploration companies do not show further interest because the gas prices are too low. So we are working on increasing the rates.”
He added, “Bangladesh has no alternatives to producing gas for tackling the demand. This is why I do not see any problem with the upcoming move even if the price is raised to nine dollars per cubic metre, because the country imports LNG at double the price.”
What do experts say?
Terming Petrobangla’s decision as irrational, Energy expert Mohammad Tamim said, “Foreign companies will not be interested in the amended PSC until they have a clear idea about the Bay of Bengal.
“Myanmar and India have attracted IOCs with comprehensive survey data, and Bangladesh must do the same.”
Geologist Prof Badrul Imam of Dhaka University said, “A multi-client survey is essential to get a full idea of the sea blocks.
“Different Blue Economy Cells of Bangladesh and the Ministry of Energy have a lot of data collected through offshore seismic surveys, and this data should be made public to attract IOCs.”
According to Petrobangla, state-run Indian firm ONGC Videsh is currently working in blocks 4 and 9 of the shallow sea. They have already drilled up to 3,200 meters of a 4,200-metre well in Block 4.
According to the agreement, ONGC is contractually bound to drill another well in Block 4 and a third one in Block 9 by 2023.
