A new government decision to limit the award of oil and gas exploration rights to two deep sea blocks per company or venture, has stalled the signing of production sharing contracts (PSCs) with a joint venture of ConocoPhillips and Statoil.
“We have observed their previous activities when signing for the blocks. We have taken a decision that we will only sign two instead of three blocks with them,” Secretary of Energy and Mineral Resources Division (EMRD) Md Abu Bakar Siddique told the Dhaka Tribune.
A top EMRD official, seeking anonymity, said Prime Minister Sheikh Hasina, also the minister for power, energy and mineral resources, had directed the division not to award more than two blocks to a single company or venture.
The government now prefers that the joint venture bids for two adjacent deep sea blocks.
The signing of the PSCs has been further held up because US-based ConocoPhillips and Norway-based Statoil ASA have expressed an interest in two non-adjacent blocks, 12 and 21, leaving block 16, which they do not want, idle between them.
Representatives of the joint venture, at a recent meeting with the state minister for energy, also requested that gas prices be increased above the previous offer, the EMRD official said. But the government did not agree to it, he added.
ConocoPhillips and Statoil earlier submitted bidding documents for three blocks, at a time when the government had not yet decided to limit awards to two blocks per venture.
In January, ConocoPhillips and Statoil jointly submitted bidding documents to explore for oil and natural gas in three deep-sea blocks in the Bay of Bengal – 12, 16 and 21 – under the amended Model PSCs 2012.
The bidding documents submitted at that time for the three blocks included provisions for 2D seismic surveys of each block and the sinking of exploratory wells in each block, with an estimated outlay by the oil companies of $109m over several years.
On February 19, Petrobangla recommended that the EMRD sign the PSCs following necessary approval from the Cabinet Committee on Economic Affairs. But no progress has been made so far because the EMRD has taken no further steps in this regard.
“Regarding our bids on Blocks 12, 16 and 21, we seek award of all three blocks; however, we have been informed that the government may wish to award only two blocks to the ConocoPhillips-Statoil joint venture,” ConocoPhillips Bangladesh Managing Director Tom Early told the Dhaka Tribune.
“We have informed the Ministry and Petrobangla of our block preferences in terms of priority, which we believe will allow the joint venture to spread risk and increase our chances of success,” he said.
But because they are not adjacent blocks, the PSCs have not been finalised.
“The government is saying that it is not possible to leave a block idle in the middle. The oil companies may either take blocks 12 and 16, or 16 and 21, but not 12 and 21, leaving 16 stranded in the middle because no other company will likely come forward to explore it,” an official said.
In June 2011, a PSC was signed between ConocoPhillips Bangladesh Exploration 10/11 Ltd and Petrobangla for the exploration of offshore blocks 10 and 11, the country’s first ever deep water hydrocarbon hunt. ConocoPhillips later relinquished blocks 10 and 11.
