In the ruling by the International Tribunal for the Law of the Sea in June 2012, Bangladesh won its case relating to the demarcation of boundaries for disputed maritime-territory with Mynmmar.
Maps have duly been revised, and calls made on hydrocarbon companies to bid for new exploration blocks in these deep sea areas.
The bidding offered nine shallow blocks and three deep-sea blocks, each having exploration areas of 4,500-7,700 square kilometres; the deep sea-blocks (DS-12, DS-16 and DS-21,) each contain between 3,200-3,500 square kilometres and a depth between 200 to 2000 metres.
Geologically deep-sea areas can offer good prospects for hydrocarbon potential.
To explore oil and gas in these blocks, Petrobangla, at first, invited tenders in December last year. Until April this year, a total of 14 companies purchased bid documents; they were US-based Chevron, ConocoPhillips and ExxonMobil; Anglo-Dutch Shell Oil, Australian Santos and Carnarvon; Statoil of Norway; Kris energy of Singapore, ONGC of India; ENI of Spain; Premier of the UK; Bapco of Bahrain; Cairn India and CNoac.
Two international oil companies ConocoPhillips and ONGC-Videsh, submitted bids separately for three off-shore shallow blocks. ConocoPhillips bid for block no SS-07 and Indian ONGC for blocks no SS-04 and SS-09. These blocks are located in the Bay of Bengal where there is no clash with neighbouring India or Myanmar.
However, in a call for re-tender from April to July, this year, Bangladesh received a poor response; only Santos-Kris energy, an Australian-Singapore based joint-venture, submitted a bid for a single shallow water block on the closing day of submission.
A total of six shallow water blocks placed for bidding in this re-tender similarly received poor response.
Petrobangla and energy sources said the main reason for the poor response was the low gas price offered by the government; in the same period, India, Myanmar and Sri Lanka had also called for international bidding and they had increased their gas price to be $5.5 more, per thousand cubic foot, than Bangladesh.
Bidding for the blocks of neighbouring countries was therefore more attractive to international oil companies.
Bangladesh’s bidding process was weakened by the combination of more attractive prices elsewhere and because of the risks and high investments associated with the Bay of Bengal.
Experts consider the lack of adequate geological, geophysical data and information, banning of export options and absence of tax incentives all acted as limits against the interest of international companies when submitting bids.
The companies had expressed such concerns with high officials of the Government of Bangladesh during pre-tender meetings. In a pre-bidding meeting, IOCs had asked for 2D seismic data on deep-sea areas but Petrobangla did not respond citing reasons of secrecy.
Chevron, the country’s leading international company, also a bidding participant, demanded flexibility in the deep sea off-shore hydrocarbon bidding to allow for sale of the operator’s share of gas to third parties at market prices, but Petrobangla rejected their proposal.
There has proven to be some weakness with the model PSC (Production-Sharing Contract).
High officials of Pertrobangla say the government has learnt many things from this bidding process. They are confident despite the very poor response this year, that a potential company, will emerge and have taken some steps.
In particular they have already updated the model PSC and discarded some provisions to make it more attractive for IOCs. Hopefully this will secure new bids and the highest benefits.