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Government ponders new PSCs for oil and gas exploration

  • Published at 01:51 am August 27th, 2017
Government ponders new PSCs for oil and gas exploration
After facing criticism for leasing gas blocks to foreign firms through a special provision instead of through competitive tenders, the government is set to formulate separate models for offshore and onshore production sharing contracts (PSCs) with a view to awarding tenders to international oil companies (IOCs) for oil and gas exploration. The Energy and Mineral Resources Division has called for a meeting at the headquarters of the Bangladesh Oil, Gas and Mineral Corporation (Petrobangla) today with a view to discussing the PSCs, which may include increased prices of gas in order to attract bids. In addition, consideration of local firms for exploration of onshore oil and gas deposits is also likely to be discussed in the meeting, as well as the possibility for investment by local companies. Unlike the power sector, there is no policy for local private companies to invest in the energy sector. A round of bidding for tenders would be Bangladesh’s fifth for exploration of hydrocarbon deposits, following those in 1993, 1997, 2008 and 2012. A Petrobangla official, asking not to be named, said that the fifth round of bidding may take place as soon as the end of this year. “After finalising the offshore model PSC 2017 and onshore model PSC 2017, the Energy and Mineral Resources Division will send them to the Cabinet Committee on Economic Affairs for approval,” he said, adding that Petrobangla could not solicit tenders until then. On the government’s behalf, Petrobangla leases out oil and gas wells, engaging IOCs for exploration. There are 22 onshore blocks and 26 offshore blocks of oil and gas deposits in Bangladesh. Currently, US-based Chevron and KrisEnergy of Singapore are engaged in onshore hydrocarbon operations, while Australian company Santos and Indian companies ONGC Videsh Ltd and Oil India Ltd are conducting surveys for offshore oil and gas exploration. On March 15, 2017, the government signed a deal with South Korean company Posco Daewoo Corporation to conduct seismic survey and explore oil and gas resources in deep sea block (DS) 12 under the Speedy Supply of Power and Energy (Special Provision) Act 2010. The government had also selected Russian energy giant Gazprom and two other foreign oil companies to dril 13 exploratory onshore gas wells in the country, even though state-owned exploration company Bapex has the capacity to implement the project. The companies were selected under the Speedy Supply of Power and Energy (Special Provision) Act, 2010 after they submitted Expression of Interest (EoI) letters for the project, sources told the Dhaka Tribune. In the previous drilling job, which Gazprom received without having to go through the tender process, the company failed to extract the target amount of gas when it drilled 15 wells between 2012 and 2016. Bapex needs only Tk80 crore to drill a well, but it costs as much as Tk200 crore per well when a foreign company conducts the operation. The last model PSC was adopted in 2012 and was later amended following immense pressure from the IOCs, which argued that the prices for oil and gas listed were too low. 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 amendments also exempted IOCs from paying transport tariffs and corporate tax. Prof Ijaz Hossain of the department of chemical engineering in Bangladesh University of Engineering and Technology told the Dhaka Tribune: “Bangladeshi companies could be awarded deals for onshore gas and oil exploration, which will be a great opportunity despite being a risky venture. In order to attract IOCs, the offshore gas prices may be increased.” He added that even if the price for oil and gas from offshore wells was set at $8 per Mcf, it would still be profitable for Bangladesh.
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