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Ministry seeks changes to MPSC for deep sea blocks

  • Published at 06:30 pm August 23rd, 2013
Ministry seeks changes to MPSC for deep sea blocks

The Energy and Mineral Resources Division (EMRD) is expected to place a proposal at the next meeting of the cabinet committee on economic affairs to amend the Model Production Sharing Contract (MPSC) 2012, which will apparently favour foreign oil companies working in Bangladesh.

EMRD Secretary Md Mozammel Haque Khan told the Dhaka Tribune last week that his office had recently received the proposal after vetting from the law ministry.

Sources said Petrobangla, the state-run oil, gas and mineral corporation, has reportedly proposed amendments to the MPSC for deep sea blocks under pressure from international oil companies (IOCs).

The proposed amendments include increasing the price and share of gas for IOCs, a higher cost recovery limit and corporate tax payment by Petrobangla.

On December 17, 2012, Petrobangla invited international tender for exploring oil and gas in 12 blocks under the Offshore Bidding Round 2012. Of the blocks in the Bay of Bengal, nine are in shallow sea, while three are in deep sea.

However, Petrobangla suspended the bidding process for the deep sea blocks, allegedly after “requests” from interested IOCs.

On 27 July, Prime Minister Sheikh Hasina, who is in charge of the energy ministry, consented to an EMRD proposal to amend the MPSC for deep sea hydrocarbon blocks.

According to the proposed 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.

The IOC would be allowed to sell 50% of its share of gas to a third party inside Bangladesh. It could also sell off Petrobangla’s share, if the latter does not purchase it. At present, there is no scope to export gas.

Cost recovery limit has also been raised to 70% from 55% of the produced oil and gas in the amended MPSC, while Petrobangla will have to pay 37.5% in corporate tax on behalf of IOCs.

Four foreign companies Chevron, Santos, Conoco-Phillips and Tallow are working in the country now, following international biddings in 1993, 1997 and 2008.