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Dhaka Tribune

Bangladesh signs 2 PSCs for offshore exploration

Update : 17 Feb 2014, 09:41 PM

Bangladesh signed two deals with India’s state-owned ONGC Videsh Limited and Oil India Limited yesterday in a bid to start oil and gas exploration in two offshore shallow blocks in the Bay of Bengal.

The government and Petrobangla jointly signed the production sharing contract (PSC) for the shallow blocks 4 and 9 under the fourth round of model PSC.

The two Indian companies – the first from the neighbouring country to pen deals with Bangladesh for offshore drilling – would invest total $144.8m for the two blocks.

“We will be able to decrease the energy crisis if we find gas from offshore wells. In future we will go with more contract agreements,” said Finance Minister AMA Muhith who was present as chief guest at the signing ceremony at the city’s Petrobangla office.

“To ensure our energy security we have to drill more wells,” Muhith added.

DK Sarraf, managing director of ONGC Videsh Limited, told the Dhaka Tribune: “In upcoming winter we will start 2D seismic survey in offshore. The deals have been signed today [yesterday] will be a 50-50 share in investment with two Indian companies.

“The company is exploring hydrocarbon to ensure energy security,” he said.

India’s ONGC and Oil India have offered to invest $58.4m to conduct 2D-seismic survey of 2,700 line-km, 3D-seismic survey of a 200sq-km area and drill two wells in block 4.

They have also offered to invest $86.4m to conduct 2D survey of 2,850 line-km, 3D survey of a 300sq-km area in block 9 and drill three wells.

According to the deal, the government’s profit-sharing ratio of two blocks will be 60%-85% for gas and 70%-90% for oil. For both of the blocks, the contract period is eight year each, with the first five years as initial exploration period and rest are subsequent exploration period.

The companies would be obligated to use the maximum Bangladeshi working hands, which will be gradually increased to 50% during exploration and to 90% by the 10th production year.

The cost recovery will be maximum 55% per year of available petroleum. No cost recovery of expense and provision of compensation would be available if there is negligence from the contractor.

The contractors cannot claim compensation if petroleum operation is suspended because of dispute, according to the deal.  

If the company goes into commercial operation, then Bapex on behalf of the government will bear 10 percent of the total investment cost.

Earlier, Energy and Mineral Resources Division Secretary Md Mozammel Haque Khan said:

“We will also sign [PSC for] one block with the joint venture Australia-based Santos and Singapore-based Kris Energy Limited, and another block will be signed with the US-based ConocoPhillips on February 25.”

Three years ago, Bangladesh had signed deals to drill two deep sea blocks with ConocoPhillips, while international biddings were called under the PSC in 1993, 1997 and 2008.

Meanwhile, Dhaka University’s Geology Professor Badrul Imam told the Dhaka Tribune that the deal for the two offshore wells would help meet future gas crisis.

“Since independence, 19 wells have been drilled offshore, but gas was only found in two fields, Sangu and Kutubdia,” he said.

Sangu operations were closed and field was declared abandoned last October and Kutubdia operations were shut down few years back.

“Bapex will need to build its capacity to drill wells with its manpower by learning from the companies who are now drilling the wells,” Imam said, adding that Bapex alone was currently not capable of drilling as the technology was complicated and the expenditure was three times higher than onshore.

“This is a risky venture to drill offshore wells. For this reason, many companies do not want to take the risk. But one day our government has to take the challenge,” the geology teacher also said.

Senior Assistant secretary for Energy and Mineral Resources Division Khadiza Naznin, Secretary of Petrobangla Imam Hossain, Secretary of Bangladesh Petroleum Exploration and Production Company Limited (Bapex) Md Abdus Sabur, Head of Geo-Science and Business Development of ONGC Videsh Ltd NR Hazarika and Oil India Ltd General Manager (Geology), BD Asia Pacific, AJ Duggal signed the deals on behalf of their respective sides.

Prime minister’s Adviser Tawfiq-e-Elahi Chowdhury, State Minister for Power, Energy and Mineral Resources Nasrul Hamid, and Energy and Mineral Resources Division Secretary Md Mozammel Haque Khan attended the programme.

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