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US cos eyeing offshore petroleum exploration

Ashraful Islam Raana
27 Feb 2024 01:57:09 | Update: 27 Feb 2024 01:57:23
US cos eyeing offshore petroleum exploration

Several US companies are showing keen interest in exploring offshore blocks for oil and gas in Bangladesh.

ExxonMobil, a US-based multinational oil and gas corporation, has been considering taking part in the bidding round for leasing 15 blocks in deep sea since last year.

And another US company, Chevron, has also proposed to explore for oil and gas in the Bay of Bengal recently. Chevron Bangladesh is already extracting natural gas from onshore area in the Sylhet region.

Energy Division sources said that Petrobangla is working on the proposals put forward by Chevron and ExxonMobil. However, no deal will be signed without floating international tenders. Petrobangla will hold an international bidding round in March for offshore oil and gas blocks. The government does not intend to allocate more than four blocks to any single company, officials concerned said.

Petrobangla Chairman Janendra Nath Sarkar told The Business Post that no company will be directly awarded job without tender as it creates various controversies.

He mentioned that if bidding rounds are called in March, a six-month timeframe will be set to submit proposals by International Oil Companies (IOCs).

US companies may secure offshore exploration

Even though international bidding rounds have been conducted, US companies ExxonMobil and Chevron are almost certain to secure work in offshore oil and gas exploration in Bangladesh, Petrobangla officials have indicated.

Seeking anonymity, a high official of Petrobangla told The Business Post that it is assured that both Chevron and ExxonMobil will participate in the tender. No other companies have shown interest. If others do not participate, either ExxonMobil or Chevron may be awarded work or both may engage in offshore oil and gas exploration.

ExxonMobil eyes Bay of Bengal

ExxonMobil, known as a global energy giant, proposed to Petrobangla last March to conduct oil and gas exploration in the Bay of Bengal. The company wants to take out lease on the entire deep sea area (15 blocks).

On July 16, ExxonMobil in another letter sent to Petrobangla said that the company will invest $40 to $50 million in conducting a two-dimensional seismic survey in the deep sea. If gas is found, three-dimensional seismic surveys will be conducted later for further confirmation, costing $50 to $100 million.

Additionally, ExxonMobil plans to invest $80 million in the development of each well, totalling $10 to $30 billion for deep sea exploration.

ExxonMobil mentioned in the letter that if the entire process becomes successful, Bangladesh could save $3 billion annually from its current expenditure on importing liquefied natural gas (LNG).

On February 20, representatives of ExxonMobil met with State Minister for Power, Energy, and Mineral Resources Nasrul Hamid to discuss their interest in offshore oil and gas exploration.

During the meeting, they expressed their willingness to proceed with two-dimensional surveys or seismic services. If necessary, they will conduct three-dimensional surveys later. Following the analysis of survey reports, they will decide whether to proceed with offshore work.

Chevron's eye on offshore
For the past 25 years, US company Chevron has been conducting gas exploration and extraction onshore in Sylhet region. Currently, Chevron supplies 60 per cent of the country's gas.

On February 18, Chevron officials expressed their interest in offshore oil and gas exploration, Nasrul Hamid told reporters at Bibiyana gas field in Habiganj.

He said Chevron is our long-time and trusted partner. They have collected data and expressed interest to Bay of Bengal.

Eric Waker, president of Chevron Bangladesh, told this correspondent, "We are analysing multi-client survey reports on Bay of Bengal. Chevron will participate in the offshore bidding round in March."
Regarding behind the interest shown after long time, Eric Waker said, "Previous production sharing contracts (PSC) were not lucrative for us."

Increasing interest in PSC

Petrobangla Chairman Janendra Nath Sarker confirmed that the state institute will invite international tenders in March to allocate 26 blocks in the Bay of Bengal, while 11 are shallow and the remaining 15 are deep-sea blocks.

In the past decade, US company ConocoPhillips and South Korean Posco Daewoo left without completing exploration in the Bay of Bengal, alleging that the gas prices was not lucrative.

Despite several attempts to attract international tenders, there was not much interest from IOCs. Therefore, a new Model PSC has been proposed this time, which was finalised last year.

According to the model PSC in 2019, the gas price for shallow and deep-sea was set at $5.6 and $7.25 per MMBTU respectively. Bangladesh will retain 50 per cent to 80 per cent of its share in offshore gas.

As per the model PSC-2023, the gas shares of Bangladesh are 40 per cent to 65 per cent in deep-sea and 35 per cent to 60 per cent in shallow sea. Additionally, the gas export provision includes in the PSC.

This summarises the ongoing developments in the offshore oil and gas exploration in Bangladesh, indicating the potential involvement of US companies in this lucrative market.