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Chevron now wants to stay in Bangladesh, but under new terms

  • Published at 08:04 pm October 18th, 2017
  • Last updated at 10:50 pm October 18th, 2017
Chevron now wants to stay in Bangladesh, but under new terms
Chevron Bangladesh has renegaded on a decision taken five months ago to quit the country and now wants to continue its operations in three gas fields, sources from Bangladesh Oil and Gas Corporation (Petrobangla) have said. According to the sources, Chevron Asia South Business Unit Managing Director Brad Middleton met Petrobangla Chairman Abul Mansur Md Faizullah on October 8. Middleton reportedly told Faizullah about the company’s plans and also made some proposals to the state-run energy provider. “Neither Petrobangla nor the government has decided yet on how they will respond to these proposals,” a director at Petrobangla, requesting anonymity, told the Dhaka Tribune. “Chevron wants to solve these issues as early as possible and expects the government’s help.” An official of the Ministry of Power, Energy and Mineral Resources, who also sought anonymity, said that the subsidiary of the US-based oil giant has already informed the ministry higher-ups about this. However, both Chevron and Petrobangla are yet to make any official announcements regarding the former’s plans to continue operations under new terms. “The Chevron official only came to meet and discuss some issues,” Petrobangla Chairman Faizullah told the Dhaka Tribune. He also said that Chevron’s proposals were regarding routine works, but did not clarify further. On April 24, Chevron had announced that its wholly-owned subsidiary, Chevron Global Ventures Ltd, has entered into an agreement to sell the shares of its wholly-owned indirect subsidiaries operating in Bangladesh to Himalaya Energy. Himalaya is owned by a consortium comprising state-run China ZhenHua Oil, which is a subsidiary of China’s defence industry conglomerate NORINCO, and investment firm CNIC Corp, which is a government platform that focuses on supporting Chinese companies’ overseas investment. However, the Bangladesh government is yet to approve Chevron’s decision as it originally wanted to buy the shares itself, stalling the whole process. The government holds the right of first refusal in any asset sale. Chevron had planned to close the sale, part of non-core asset disposals, around mid-October. But Dhaka is still undecided over whether to back a counterbid amid doubts on whether Petrobangla has the expertise to run the fields, or the funds to make future investments. Chevron, the largest foreign investor and gas producer in Bangladesh, operates under a production sharing contract (PSC) at the Bibiyana gas field’s Block 12, and in blocks 13 and 14 of Jalalabad and Moulvibazar fields. The onshore gas fields have an average net daily output of 720 million cubic feet of gas and 3,000 barrels of condensate, or liquid hydrocarbon produced with gas. Chevron sells the entire output to Petrobangla under the PSC’s long-term sales agreements, and most of the fuel is used to generate electricity for the country. “The Bangladesh government never wanted Chevron to close their operations and leave,” another Petrobangla director said. “But as they wish to sell their assets, the government wants to buy them. In a way Chevron is still continuing their operation, and Petrobangla or the government has no problem with that at the moment.” After Chevron said it wanted to sell the three fields, worth an estimated $2 billion, the government had decided to explore the options of taking control of the company and appointed British firm Wood Mackenzie as a consultant to evaluate the assets and liabilities. The government was in a dilemma until recently while waiting for a final asset assessment by Wood Mackenzie before making a final decision, according to the Petrobangla official. Sources said the government is now backtracking from its earlier position, now believing it to better for the country if Chevron, which operates efficiently in the gas fields and extracts half of the country’s total gas production, continues its operation.

The proposals

Chevron Bangladesh has proposed the setting up of centrifugal compressors at most of the wells at the Bibiyana gas field under the PSC, at a cost of more than $500 million, sources said. The company believes the move will boost gas pressure and extraction at Bibiyana field, which plays a crucial role in maintaining the country’s energy security. Centrifugal compressors use a rotating disk, or impeller, in a shaped housing to force the gas to the rim of the impeller, increasing the velocity of the gas. Sources said Chevron also wants to sell gas to Petrobangla under the PSC at $3 per Mcf (1,000 cubic feet), instead of the current $2.76 rate. “But it that was to happen, the gas price will rise following amendments to the PSC in question,” said a Pertobangla official on condition of anonymity. “That will only be possible if the government agrees, but that will not be correct in principle.” The official added: “Their proposal to install a compressor is logical. Earlier, they had made the same proposal, but then Petrobangla had suggested lowering their set up cost. At the end, that proposal’s future was stalled as Petrobangla did not show much interest at that time.” Chevron Bangladesh Communications Manager (External Affairs) Shaikh Jahidur Rahman declined to comment on the matter, saying: “Chevron does not comment on rumour or speculation regarding commercial discussions.”