Sangu, the first offshore gas field in the country, run by Australian oil and gas exploration company Santos, will be shut down permanently on October 1 with its reserves running out fast.
The closure is likely to have serious effect on household and power plants gas supply in the Chittagong region, as Sangu is the main source of gas in the area.
“At present, a total of 3 million cubic feet of gas is being produced daily [from the Sangu 11 well]. In a recent letter to Petrobangla, Santos said running the field would not be commercially viable and thus has to be declared abandoned,” Muhammad Imaduddin, Director of Bangladesh Oil, Gas and Mineral Corporation (Petrobangla) told the Dhaka Tribune.
According to the letter, the gas field will be shut down on October 1, at 7am.
“Petrobangla and Bangladesh Gas Fields Company Ltd officials will visit the field on September 22,” Imaduddin said.
“The officials will make recommendations based on the situation of the platform out in the Bay of Bengal, the processing plant and the pipelines,” he said.
BGFCL, a concern of Petrobangla, will later monitor the gas field according to the recommendations.
Once the Sangu gas field is abandoned, energy-starved south east of the country will suffer for years to come.
However, a Petrobangla official hoped that the state-run agency will be able to supply at least 200mmcfd more gas from several gas fields by December. So the gas crisis may see a little progress.
Santos had previously requested Petrobangla to take over the operations of the Sangu platform in the Bay of Bengal, its processing plant and the pipelines – worth around $500m – within 90 days of the notice period, as per the Production-Sharing Contract.
The Australia-based company had started supplying gas from the Sangu-11 well on June 17, 2012 at a rate of 25mmcfd, after signing the first-ever third-party gas purchase and sales contract in the country, with state-owned Power Development Board (PDB) as the purchaser.
This was the first gas sale to an end-user at market price by any international oil company operating in Bangladesh.
Before starting production at the Sangu-11 well, Santos had shut the depleted main Sangu gas field, in order to use the single offshore platform. The older Sangu gas field was then supplying around 8mmcfd of gas.
The primary Sangu gas field and Sangu-11 well has produced 485.78bn cubic feet (bcf) of gas till December 2012, according to Petrobangla officials.
From Sangu-11, the Australian firm was selling gas to the PDB at $4.50 per Mcf (1,000 cubic feet), up 55% from the previous rate of $2.90 per Mcf, for gas from the older Sangu well.
According to Petrobangla’s estimate, Sangu field had a proven reserve of 577.80bcf gas, however, Prof Ijaz Hossain of Bangladesh University of Engineering and Technology (Buet) believes the estimates of has been a matter of “hide and seek”.
“The reserve is supposed to exhaust, since an excessive amount of gas was produced in the beginning,” he told the Dhaka Tribune.
“The expected gas could not be extracted from Sangu’s main gas fields because of over extraction. It may cause danger to the gas fields,” said Ijaz Hossain.
“The Sangu gas field could produce more than 150mmcfd, but now it can only produce 3mmcfd,” he said.
Sangu was discovered by Cairn in 1996 who handed over the ownership with assests and liabilities to Dutch company, Shell in 1998.
After a steady production of gas for six years from Sangu, Shell gave all of its upstream assets and undertakings back to Cairn Energy in 2004.
In October 2007, Santos acquired from Cairn Energy, a 37.5% interest in the Sangu Development Area, and a 50% interest in Block 16 exploration acreage, located in the Bay of Bengal.
In December 2010, Santos acquired the remainder of Cairn’s interests in Bangladesh, and became operator of the acreage.