Energy-hungry Bangladesh needs cheap gas, undoubtedly, from domestic sources, extracted from the existing and potential gas fields and also imported from abroad to feed the growing demands of power plants, industries, and households. In addition, we should not neglect the fact that natural gas reserves do not increase but rather deplete gradually.
Bangladesh started buying liquefied natural gas (LNG) in 2018 to fill the gap between what it needed and what it could get. Yet, as of June 21, production from the country's onshore gas fields was 700mmcf (million cubic feet) below capacity, and distribution companies were not able to supply adequate gas to the power plants. Together with state-run Bapex and other companies, international energy giants produced an average of 2,175mmcf of natural gas, while LNG imports added 871mmcf.
Since gas production cannot be improved significantly overnight, the government inked agreements with Oman and Qatar to ensure a steady supply under a long-term strategy. However, there is a risk of sudden price hikes and a dollar crisis, which may hinder LNG imports again. Exploration of new wells and gas fields is therefore essential, and the long-stalled finalization of the production-sharing contracts (PSC) for offshore blocks should not be further delayed.
Due to Bangladesh's geo-political and economic significance, as well as the ramifications of gas and oil exploration in the Bay of Bengal, it is prudent to proceed with caution despite the country's need for foreign investment and economic gas. Therefore, despite its desires, the government must safeguard the nation's interests by thoroughly examining the bidders' proposals and demanding a guarantee from the contractor that it will cover all costs associated with a potential oil release.
The nation has 26 offshore islets, and 24 of them are still available. Currently, a joint venture of India is operating on two of the eleven shallow blocks. The country's gas production was around 2,000mmcfd (million cubic feet per day) in 2011 when the demand was roughly 2,500mmcfd.
On June 16 of that year, Bangladesh signed the PSC with US oil company ConocoPhillips to explore oil and gas in hydrocarbon blocks 10 and 11. It was given the scope to export 80% of the gas if Petrobangla expresses its inability to buy it at an export price, a provision widely criticized by various quarters. The firm later pulled out of the project due to the non-availability of gas or oil. In 2008, ConocoPhillips won these blocks, but could not sign the PSC.
Common concerns
There are numerous instances of ambiguous terms and conditions in the agreements, abuse of power for undue advantage, and explosions and oil spills around the world as a result of the negligence of the authorities concerned. The intense pressure exerted on complex apparatus during offshore drilling projects triggers explosions like those at the Deepwater Horizon on April 20, 2010, which released crude and gas into the Gulf of Mexico and cost British Petroleum (BP) $69 billion.
With 11 fatalities, the incident's death toll is low compared to other oil platform disasters. However, the detonation resulted in the largest oil spill in US history, with 4 million barrels of oil leaking into the Gulf of Mexico. The initial explosion, which resulted from a gas explosion within the well's core, injured many of the 126 crew members aboard the Deepwater Horizon. Families of the injured and deceased have filed at least 50 wrongful death or personal injury lawsuits against BP. The oil leak lasted nearly three months.
On February 15, 1982, the mobile offshore drilling rig Ocean Ranger sank in Canadian waters, tragically murdering all 84 crew members on board. The semi-submersible platform was drilling a well on the Grand Banks of Newfoundland when it was struck by a storm with 65-foot-tall swells. One of these surges shattered a window on the port side, resulting in water damage to the ballast control room.
Think about what's going on in Guyana.
In May, Guyana's High Court issued a landmark ruling against the Environmental Protection Agency (EPA) and ExxonMobil's subsidiary in the region, in a case. Two Guyanese citizens, Frederick Collins and Godfrey Whyte, filed the lawsuit against the EPA and Exxon as co-defendants. According to The Intercept, they accused the EPA of failing to enforce the requirements of its own permits by never obtaining a guarantee from ExxonMobil, or its subsidiary Esso Exploration and Production Guyana Limited, that the company would cover all costs associated with a potential oil leak.
Exxon's own environmental impact assessments state that such a disaster in Guyana could send oil to the beaches of fourteen distinct Caribbean islands, the majority of which rely on fishing and tourism, and all of which could hold Guyana liable for damages. The costs would be exorbitant, which is why the permits for offshore drilling in Guyana require not only an independent liability insurance policy from Esso but also an unlimited financial guarantee from its parent company to cover costs in excess of those covered by insurance.
Esso joined the case, contending that the plaintiffs' interpretation of the law was incorrect and that Guyanese citizens lacked the legal standing to bring such claims. However, Justice Sandil Kissoon ruled in favour of Collins and Whyte on all counts, concluding that Esso's permit plainly stated the insurance and guarantee requirements. Guyanese citizens had every reason to doubt the EPA's failure to secure these assurances.
In Guyana, it has become difficult to differentiate between the energy company and the government. Exxon executives attend the president of Guyana in his suite during cricket matches, and the vice president routinely holds press conferences to defend the oil company. However, the company asserted that it had complied with all applicable laws throughout the exploration, appraisal, development, and production phases, and that it was committed to developing the resources responsibly to maximize value for all stakeholders, including the government and people of Guyana.
Nevertheless, Justice Kissoon ordered the EPA to issue an immediate enforcement action against Esso, requiring it to provide an unrestricted financial guarantee from ExxonMobil and evidence of adequate liability insurance or have its drilling permit suspended. The EPA appealed and, on June 8, a judge on appeal temporarily suspended the order pending the outcome of the appeal while requiring Exxon to post a $2bn guarantee.
It is a significant slowing of Exxon's operations in Guyana, which the company projected would surpass the Texas Permian Basin within five years, according to The Intercept, when Guyana would be responsible for more than a quarter of the company's global output.
Probir Kumar Sarker is News Editor of Dhaka Tribune
