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Indian companies seek additional two months to start drilling for gas in Bay of Bengal

  • Published at 12:40 am January 8th, 2018
Indian companies seek additional two months to start drilling for gas in Bay of Bengal
Two Indian state-owned oil companies have asked to extend by two months their deadline to start drilling for gas in the shallow off-shore block of the Bay of Bengal allocated to them. ONGC Videsh Limited and Oil India Limited were scheduled to start drilling from January 2018, according to a four-year-old deal signed between Bangladesh and India. However, the Indian companies applied to move the deadline back by two months to March 2018. The companies won the production sharing contract, signed with Bangladesh government and Petrobangla on February 17, 2014 to explore hydrocarbon reserves of Block-SS 04 and Block-SS 09, in the offshore bidding in 2012. However, the deadline extension application is only for Block-SS 04 and uncertainty is looming over the other block as the Indian companies are yet to inform the government of a possible start date. A director of Petrobangla, who wishes not to be named, told the Dhaka Tribune: “The Indian companies have already completed 2D seismic survey on both the shallow sea blocks and are planning to drill Block-SS 04 near Moheshkhali Island in Cox’s Bazar.” “They have already selected a drilling contractor – a joint venture of China based Sinopec and US based Halliburton – to drill well Kanchan 1 in block SS 04,” he said. According to the Petrobangla director, the Indian companies have already made a road near the plant and have undertaken other measures to start drilling. They may take extra time because their partners are working at a slow pace, he added. Meanwhile, Australia-based Santos and Singapore-based Kris Energy Limited signed a similar deal with Bangladesh government and Petrobangla on March 12, 2014 to explore offshore shallow Block-SS 11 for oil and gas. However, they have failed to even complete their 3D seismic survey in the last four years and have not informed Petrobangla yet of a date to start drilling. The contract model allows the foreign companies eight years to explore their allocated blocks. Five of those years are for initial exploration and the remaining three are for subsequent exploration. From 1971, 19 wells have been drilled offshore among which gas was found in two fields – Sangu and Kutubdia. However, the operations in both the fields were shut down. ONGC Videsh Limited and Oil India offered to invest $58.4m to conduct 2D-seismic survey of 2,700-kilometre line and 3D-seismic survey of a 200sq-km area along with drilling the two wells in Block-SS 04. In Block-SS 09, they promised $86.4m investment to conduct 2D survey of 2,850 line-km, 3D survey of a 300sq-km area and drill three wells. The Bangladesh government will take 60-85% profit for gas and 70-90% profit for oil according per deal. The Indian companies would be obligated to employ Bangladeshi workers for at least half of their workforce during exploration phase and hike it 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. They would also not be able to claim compensation if any of the operations is suspended because of dispute, according to the deal. If the company goes into commercial operation then Bapex will bear 10% of the total investment cost on behalf of Bangladesh government. On the other hand, Santos and Kris Energy offered to invest $32 million to conduct 2D seismic survey of 887-kilometre line, 3D seismic survey of 300sq-km and drill a well in Block-SS 11. The profit share ratio of the government would be 55% to 80% for both gas and oil.