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Published : 03 Jun 2026, 01:54 AM
Key Takeaways
Delayed Production: Bangladesh has failed to start commercial offshore gas production despite resolving maritime disputes over a decade ago.
Weak Framework: Inadequate data, cautious bureaucracy and weak past PSC terms discouraged major international energy companies.
Regional Progress: Myanmar and India have advanced offshore production, widening Bangladesh’s energy gap.
New PSC Hope: The revised PSC 2026 offers stronger incentives, but investor response remains uncertain.
LNG Risk: Experts warn exploration success is not guaranteed, and delays increase LNG import dependence.
More than a decade has passed since Bangladesh resolved maritime boundary disputes with Myanmar and India, yet repeated efforts to explore for oil and gas in the Bay of Bengal have failed to lead to commercial production.
Meanwhile, Myanmar has been producing gas from the same maritime region for years, while India is extracting both oil and gas from deep-sea fields.
The question remains: why has Bangladesh fallen behind?
Seeking to revive offshore exploration, the government on Sunday launched a new bidding round after revising the Production Sharing Contract (PSC).
The revised terms allow foreign companies to export gas and repatriate profits, measures intended to attract international investors back to the Bay.
The BNP government's latest initiative comes amid concerns over the country's energy security, heightened by instability in West Asia.
Whether the new bidding round can finally unlock offshore gas resources remains uncertain.
Energy experts and geologists say Bangladesh's setbacks stem from multiple factors, including inadequate geological data and surveys, administrative hesitation in evaluating bids and making decisions, an overall investment environment that has failed to attract major players, and a lack of domestic exploration capacity.
In their view, improving financial incentives alone will not be enough.
Prof Md Bodruddoza Mia, chairman of the Department of Geology at the University of Dhaka, told bdnews24.com that Bangladesh was already late in entering the offshore race.
"We have to admit that. It is late. Myanmar is already producing gas. India is also moving ahead on its front. We have fallen behind," he said.
However, he added: "Better late than never. We must begin now."
Repeated Bidding Rounds, Sangu's Decline
Bangladesh began offshore oil and gas exploration long before securing maritime boundaries.
The country's only significant success was the Sangu Gas Field.
According to the energy ministry, six PSCs were signed under PSC 1974 with six international oil companies for six shallow-water blocks.
The companies eventually abandoned the blocks because commercially viable oil and gas reserves could not be confirmed.
Under PSC 1994, two contracts covering Blocks 15 and 16 were awarded to Cairn Energy (now Capricorn Energy PLC), later operated through a Cairn-Shell joint venture and subsequently Santos.
No gas was discovered in Block 15.
Sangu Gas Field was discovered in Block 16 and produced gas from 1998 until 2013.
Santos terminated the contract after reserves were exhausted.
Reports at the time suggested Sangu initially contained around one trillion cubic feet (TCF) of gas.
Later assessments revised reserves to about 580 billion cubic feet.
Production, which began at roughly 50 million cubic feet per day, rose within a few years to between 140 million and 160 million cubic feet per day.
Some local experts later compared the field's fate with an "untimely death", arguing that excessive extraction from individual wells damaged underground gas layers and accelerated depletion.
Under a bidding round based on Model PSC 2008, a PSC was signed with ConocoPhillips for deep-sea Blocks DS-10 and DS-11.
However, the company relinquished both blocks in 2015, citing unfavourable financial terms.
Maritime Victory But Limited Progress
Bangladesh secured sovereign rights over 118,813 square kilometres of the Bay of Bengal after resolving maritime disputes with Myanmar in 2012 and India in 2014.
The offshore area was subsequently divided into 26 blocks, including 11 shallow-water and 15 deep-water blocks. Yet exploration efforts failed to gain momentum due to a lack of continuity.
Under Model PSC 2012, Santos signed a contract for shallow-water Block SS-11. The company withdrew from the block in 2020 as part of its broader exit from Asian operations.
Although Santos, ONGC and several other companies secured blocks during the 2012 bidding round, none succeeded in reaching commercial gas production.
South Korea's Posco Daewoo also exited a deep-water block amid disagreements over pricing.
India's ONGC spent years working in shallow-water Blocks SS-04 and SS-09 but failed to achieve commercial success.
New Incentives, Old Challenges
Despite years of energy shortages, Bangladesh did not launch a new offshore bidding round for nearly 11 years.
A revised Model PSC was prepared in 2019, but concerns over profitability, along with the COVID-19 pandemic and other factors, failed to generate sufficient international interest.
In mid-2023, the Awami League government renewed efforts to attract offshore investment.
Norwegian-American joint venture TGS-SLB conducted a multi-client 2D survey that provided more concrete data on potential gas reserves in the Bay of Bengal.
The government subsequently revised gas pricing and profit-sharing terms and launched a fresh bidding round in 2024.
Although seven global giants -- ExxonMobil, Chevron, Inpex, PTTEP, CNOOC, KrisEnergy, and ONGC -- purchased tender documents, not a single company submitted a formal proposal.
Following the July mass uprising and the fall of the Awami League government, the interim administration led by Muhammad Yunus extended the bidding deadline by three months, but still failed to attract bids.
After assuming office, the new government revised the PSC once again and announced a fresh bidding round.
Companies will be able to purchase bidding documents and submit proposals until Nov 30.
Why Bangladesh Fell Behind
Myanmar has been producing gas from the Shwe field since 2014 following the settlement of maritime boundary disputes.
According to Myanmar government data, much of that gas is exported to China.
India, meanwhile, began producing oil and gas from deep-water fields in the Krishna-Godavari Basin in 2024, having already extracted gas from shallow-water areas for more than two decades.
Bangladesh secured its maritime boundaries with Myanmar and India more than a decade ago, yet has failed to begin exploration in most of its 26 offshore blocks.
Although companies including Santos and ONGC secured exploration rights, none achieved commercial success.
Energy experts say several factors contributed to the failure, including unattractive incentives, administrative caution and a long-standing belief that Bangladesh's gas potential had largely been exhausted.
Retired Bangladesh University of Engineering and Technology (BUET) professor Ijaz Hossain said Bangladesh had not offered international companies sufficient incentives to offset the risks involved in offshore exploration.
The energy expert also pointed to reluctance within the decision-making process, saying officials were often hesitant to take responsibility for awarding contracts due to fears of future scrutiny.
According to Ijaz, misconceptions about dwindling domestic gas reserves also encouraged policymakers to favour imported energy over exploration.
He added that opposition to foreign participation had further slowed progress.
Former Bangladesh Petroleum Exploration and Production Company Limited (BAPEX) managing director Md Amzad Hossain believes another major weakness has been the limited involvement of the state-owned exploration company in offshore activities.
Without direct participation, Bangladesh remains dependent on foreign companies that will only invest when they see clear commercial benefits, he said.
Data Gap Remains
Prof Md Bodruddoza believes Bangladesh's offshore areas remain largely unexplored.
"In reality, exploration in the sea has been very limited. It would not be wrong to say it has hardly happened at all," he said.
He argued that more seismic surveys, geological studies and data analysis should have been completed before attempting to attract large-scale deep-sea investment.
According to sector experts, international energy companies typically require reliable multi-client seismic data before committing billions of dollars to offshore projects.
However, Bangladesh's offshore blocks still lack a sufficiently comprehensive data repository, reducing investor confidence and making exploration less attractive.
What Has Changed in the PSC?
The government says it has addressed many of the concerns raised by international energy companies in previous bidding rounds through the new Bangladesh Offshore Model PSC 2026.
The revised framework offers several financial incentives.
Companies will now be allowed to fully repatriate profits, while signature bonuses and royalties have been removed. Gas prices will be linked to international Brent crude prices.
The PSC also allows up to 100 percent cost recovery for both shallow and deep-water blocks, although annual recovery will be capped at 75 percent.
Companies will also be able to sell their share of gas to third parties in the domestic market, meet local demand, or export it subject to Petrobangla's first right of refusal.
Energy ministry officials said previous concerns centred on gas pricing, pipeline tariffs, profit repatriation and limited geological data.
Prof Bodruddoza said the key weaknesses identified in earlier bidding rounds had been addressed in the revised contract.
Institute for Energy Economics and Financial Analysis Lead Energy Analyst Shafiqul Alam also believes the previous PSC failed to attract major international oil and gas companies.
"The earlier terms were not attractive enough. The government has now offered significantly better conditions," he told bdnews24.com.
He noted that revisions to the pricing formula and an increase in the benchmark rate from 10 percent to 11 percent could improve investor interest.
However, Shafiqul cautioned that better contract terms alone would not guarantee investment.
"Investment depends not only on the PSC but also on the broader investment climate.
“Everything will depend on a stable environment and several other factors," he said.
Bodruddoza echoed that view, saying improved financial incentives must be accompanied by stronger data, greater technical capacity and policy continuity.
Risk of Missing Shared Resources
Experts say many geological structures in the Bay of Bengal extend across national boundaries, meaning some potential gas reservoirs may be shared with India or Myanmar.
According to Prof Bodruddoza, delays in exploration could allow neighbouring countries to benefit first from shared resources.
"If oil and gas exist in joint structures and neighbouring countries begin extraction first, they could take the resources," he said.
Referring to directional drilling technology, he noted that companies can drill in one location and extract hydrocarbons from reservoirs several kilometres away.
Shafiqul argued that Bangladesh should have prioritised development of its own gas resources much earlier rather than relying increasingly on imports.
"Bangladesh needs its own gas. Greater emphasis should have been placed on both onshore and offshore exploration long ago, alongside BAPEX's activities," he said.
In his view, earlier action could have reduced the country's growing dependence on imported liquefied natural gas (LNG).
Can BAPEX Deliver?
Experts say Bangladesh's state-owned energy companies still lack the capacity required for deep-water exploration.
Energy Minister Iqbal Hassan Mahmood Tuku has acknowledged that BAPEX does not yet possess the technology or experience needed for deep-sea operations.
However, former BAPEX MD Amzad argues that the state-owned explorer must remain involved in project planning, supervision and implementation.
"When BAPEX is involved and given the opportunity to work, it will gain the necessary knowledge and experience," he said.
According to him, drilling rigs, vessels, logging services and other technical support can be hired from international providers, but strategic planning and decision-making should include the national company.
"BAPEX is like the owner of the territory. It should do what it can itself and hire services where necessary," he said.
Prof Bodruddoza believes BAPEX, Bangladesh Gas Fields Company Limited (BGFCL) and Sylhet Gas Fields should all be strengthened.
"If these companies continue to operate strictly within a government structure, they will struggle to develop," he said.
He argued that competitive salaries, incentives and skilled personnel comparable to those offered by international oil and gas companies are essential for building exploration capacity.
"It is unrealistic to expect top-level experts to stay and deliver under a conventional government pay structure," he said.
The Dhaka University academic also suggested bringing back experienced Bangladeshi energy professionals working abroad.
No Guarantee of Gas
While optimistic about the new bidding round, experts caution that successful exploration does not guarantee commercial gas discoveries.
Prof Ijaz said even if the government attracts the desired number of companies, Bangladesh's energy security will not automatically be assured.
"There is no 100 percent guarantee that exploration will lead to gas discoveries," he said.
The risk of failure remains significant, but without exploration there is no way to determine what resources lie beneath the seabed, he added.
Even so, Ijaz believes the current bidding round has a better chance of success than previous efforts because it is being conducted under an elected government and offers more attractive financial terms.
"People know this government. That gives it an advantage," he said.
Describing the revised PSC as highly favourable to investors, he said a range of incentives had been included to attract companies.
Although major multinational firms may remain cautious, he believes medium-sized companies could show interest, though they often have less capital for high-risk investments.
"I am optimistic there will be bids and exploration. Whether gas is found is another question. That depends on what is actually beneath the ground," he said.
Amzad argues that Bangladesh has yet to fully analyse data collected from earlier offshore surveys and drilling campaigns.
He said seismic surveys conducted since 1975 and data from 10 to 12 exploratory wells, including drilling and logging records, should have been re-evaluated by local experts.
"We have completed 32,000 line kilometres of surveys and drilled around a dozen wells. We have not properly analysed those drilling and logging data ourselves," he said.
According to him, it remains unclear whether previous wells were genuinely dry or whether shortcomings in data interpretation contributed to the disappointing results.
Amzad is also sceptical about the level of international response to the new bidding round.
"I cannot give a 100 percent guarantee. I think the chances of strong interest are low," he said.
In his view, international companies already have considerable knowledge of the Bay of Bengal's prospects through their operations in India, Myanmar and neighbouring regions, and will make investment decisions only after careful evaluation.
Growing LNG Dependence
As domestic gas production declines, Bangladesh is increasingly relying on imported LNG to meet demand.
According to official figures, the country currently supplies between 3.6 billion and 3.8 billion cubic feet of gas a day to the national grid, of which around 700 million to 800 million cubic feet comes from imported LNG.
Experts warn that excessive dependence on LNG will place growing pressure on the economy and foreign exchange reserves over the long term.
Shafiqul said Bangladesh now depends on imports for around 62 percent of its primary energy needs.
"To reduce that dependence, the country must increase domestic gas production while continuing to expand renewable energy sources," he said.
Prof Bodruddoza stressed that Bangladesh cannot afford to cut back on exploration efforts.
"We must continue exploring. There is offshore energy potential in Bangladesh," he said.
According to him, Bangladesh has so far extracted gas mainly from relatively shallow formations, but advances in technology now offer opportunities to access deeper, high-pressure reservoirs.
"Technology is gradually improving, creating opportunities to explore deeper gas-bearing formations," he said.
Bodruddoza also believes Bangladesh should have started preparing for offshore exploration much earlier.
"Our plans should have been made much earlier," he said.
