The prices of gas produced by International oil companies (IOCs) from deep sea fields will increase by 2%annually while the IOCs have also been exempted from paying the transportation tariff of 4% for using Petrobangla’s transmission lines under the amended Model Production-Sharing Contract (PSC), 2012.
The government on Tuesday approved the proposal to amend the Model PSC, after its failure to attract bidders for deep-sea oil and gas exploration.
Back in 2010, Bangladesh had won a legal battle with Chevron involving the transportation tariff, which leaves the recent exemption under question from the experts.
M Nurul Islam, a professor at the Bangladesh University of Engineering and Technology (Buet) and expert on energy sector, observed that the decision of raising the gas price annually has gone against the country’s interest.
The amendments also exempt the exploration companies from paying the corporate tax. It includes increasing the price and share of gas for IOCs, a higher cost recovery limit, and corporate tax payment by Petrobangla.
According to the amendments, an IOC would sell around 50% of the gas produced to Petrobangla at $6.50 per Mcf (1,000 cubic feet), instead of $5.50.
The IOC would also be allowed to sell 50% of its share of gas to a third party inside Bangladesh. It could also sell off Petrobangla’s share, if the latter does not purchase it. At present, there is no scope to export gas.
Recovery limit has been raised to 70% from 55% of the produced oil and gas, while Petrobangla will have to pay 37.5% in corporate tax on behalf of IOCs.
“The government has taken these decisions following pressures from the IOCs. It once asked the IOCs to pay the corporate tax and now is planning to put it on Petrobangla’s plate. This poorly reflects on the governments’ image,” Prof M Nurul Islam said.
The amendment of PSC also broadens the scope to sell oil-gas to the third party without giving Petrobangla the first right to buy and increases the cost of purchasing gas or oil from the company.
On December 17 last year, Petrobangla invited international tenders for exploring oil and gas in 12 blocks under the Offshore Bidding Round, 2012. Of the blocks in the Bay of Bengal, nine were in shallow sea, while three in deep sea.
However, Petrobangla suspended the bidding process for the deep sea blocks, allegedly after “requests” from interested IOCs.
On July, Prime Minister Sheikh Hasina, who is also in charge of the energy ministry, consented to an energy and mineral resources division proposal to amend the MPSC for deep sea hydrocarbon blocks.
Four foreign companies – Chevron, Santos, ConocoPhillips and Tullow are working in the country now, following international biddings in 1993, 1997 and 2008.