Two recently-relinquished offshore gas blocks yet to be exploited

Two recently-relinquished offshore gas blocks remain unexploited as the government has to spend about $1.7 billion to import liquefied natural gas (LNG) to meet domestic demands.

According to official sources in state-owned Petrobangla, data from seismic surveys in the two blocks – shallow water block SS-11 and the deepwater block DS-12 – show huge potentials of hydrocarbon resources.

Australian company Santos relinquished SS-11 in December 2019 while South Korean company Posco gave up block DS-12 in December 2020, they said.

“Acquired data from these two blocks show huge hydrocarbon prospects, but they remain unexploited due to lack of proper initiative,” a senior official of Petrobangla said requesting anonymity as “things are very sensitive”.

Officials said initially, DS-12 was awarded to Posco-Daewoo Corporation, a joint venture of Korean Posco and Daewoo, in December 2016 under production sharing contract (PSC) through the Speedy Supply of Power and Energy (Special Provisions) Act 2010 that does not need to follow bidding process.

Under the PSC, the contractor is obliged to meet all expenses alone in hydrocarbon exploration. But if any oil or gas is found, the contractor will get a substantial share of the resources while the remaining part will go to the government’s ownership.

As per the deal, Petrobangla will buy the contractor’s gas at a certain price defined in PSC.

Following the PSC’s terms and condition, Posco-Daewoo JV was carrying out exploration works. But at one stage, Posco acquired Daewoo’s stake and became the absolute stakeholder of the block.

But in the meantime, Posco, originally a steelmaker, changed its mind and decided to wind up hydrocarbon business.

However, before closing the Bangladesh operation, it was trying to sell it out to any other oil company, but failed to do so, said the Petrobangla officials.

They noted that until closing its business, Posco conducted a 2D seismic survey in 3,580 line kilometres in 302 square kilometre area against its mandated area of 1,800 line kilometres until it left the block.

Petrobangla officials said a substantial fall in prices of oil and gas in the global market was another reason that prompted Posco to leave the gas block business.

Under the PSC, Posco was entitled to get the natural gas price at around US$6.5 per mm Btu (million British thermal unit) with a 2 per cent annual price escalation from the date of first gas production.

But it was not happy with such price calculating its current and future investment to implement a production plan, said a top official of Petrobangla.

He also said block DS-12 has a very good potential for production as about half a dozen spots were detected by the Korean company. DS-12 is located in a depth of 1,000 to 2,000 metres, with an area of 3,560 sq km.

On the other hand, Petrobangla officials said Santos abandoned SS-11 in December 2020 because of a change in its strategic business plan.

The global headquarters of Santos decided to move its entire business to Europe and the adjoining area which ultimately prompted it to relinquish the gas block to Petrobangla as it was calculating the venture as commercially non-profitable.

Before leaving Bangladesh, Santos conducted a 2D seismic survey to 3,220 line kilometres, against its commitment for 2,100 line kilometres.

“Data acquired from the survey also show good potentials in SS-11,” said the Petrobangla official.

Petrobangla data show the country daily needs 2,890.5 million cubic feet (mmcf) of natural gas of which 400.5 mmcf is supplied from imported LNG.

Officials said the country has to spend about $1.7 billion to annually import 4 million metric tons of LNG, which is expected to rise in the coming days with increased gas consumption.

Energy experts say they believe the government should take an immediate move to re-engage foreign companies to explore and exploit potentials in the two relinquished offshore gas blocks.

“It’ll be a better option to explore gas in offshore areas by foreign companies without government fund than continuing import of LNG,” said former Petrobangla chairman Muktadir Ali.

He said gas from the offshore blocks would save Bangladesh’s hard-earned foreign currency spent on LNG import.

Echoing the view, BUET Professor Dr Ijaz Ahmed said the government should find an easy way out to explore its untapped potentials along with the import of LNG to meet the domestic demand.

“But unfortunately, due importance is not being given to gas exploration,” he observed.