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The government aims to expedite offshore exploration work and unlock the potential of the sea's ‘blue economy’
Published : 09 Dec 2024, 02:26 AM
The last time gas was discorvered in the sea was 11 years ago and the only things that have happened since are discussions and speculations.
However, momentum is now building to resume exploration efforts, raising the question of whether this new initiative will succeed where previous attempts have failed.
Following years of inactivity, the interim government, which assumed power after the fall of the Awami League administration, is now looking to advance this long-delayed process.
The hope is to open a part of the sea's untapped "blue economy."
To move forward without further delay, Energy Advisor Fouzul Kabir Khan spoke to bdnews24.com about accelerating the process of awarding exploration contracts.
As part of the initial phase of offshore oil and gas exploration, the process of selecting exploration companies is nearly complete.
Two American multinational companies and five Asian oil and gas firms have expressed interest.
The full scope of this interest will become clearer on Monday.
Zanendra Nath Sarker, chairman of the state-run Petrobangla, overseeing the offshore bidding, is optimistic about receiving a positive response from these companies.
The deadline for submitting bids is set for 1pm on Monday, after which the evaluation process will begin.
Seven international companies have collected the tender documents.
Zanendra said Petrobangla would proceed based on the proposals submitted by the companies.
Reaching this point in offshore gas exploration has been a lengthy journey for Bangladesh.
After the failure of the previous attempt in 2019, a new round of tenders was issued in March this year.
The government invited bids to lease 24 sea blocks, including nine shallow and 15 deep blocks, with the original deadline set for Sept 9.
However, after the political shift due to a student-led mass uprising in August, the deadline was extended by three months to Dec 9.
Ultimately, seven companies collected the tender documents.
This time, American multinational ExxonMobil has shown interest in exploring the Bay of Bengal, joining competition with Chevron, another US company focused on land-based gas exploration.
Other interested companies include Singapore-based KrisEnergy, with prior experience in gas exploration in Bangladesh, and India's Oil and Natural Gas Corporation, ONGC, which is already engaged in exploration in the Bay of Bengal’s shallow blocks (SS-4 and SS-9).
New entrants in the sector include Japan's Inpex, Thailand’s PTT Exploration and Production, and China’s CNOOC.
Petrobangla is now awaiting to see how many of the interested companies follow through with their bids.
Officials say the companies paid $10,000 to collect the necessary documents, and their actual interest will only be revealed once they submit their proposals.
Energy expert Prof M Tamim told bdnews24.com that offshore oil and gas exploration is crucial for Bangladesh.
However, the country has struggled to attract international contractors in the past.
He believes the new PSC model is more realistic, providing a potential opportunity.
"Still, since this is a major investment, it will depend on the final contractors," he added.
‘NO DELAYS THIS TIME’
Gas production at the Sangu gas field, discovered in the Bay of Bengal in 1996, began in 1998 but was officially shut down on Oct 1, 2013, after 15 years.
Since then, no additional gas from the sea has been added to the national grid.
Despite concerns over Sangu's depleting reserves, various plans were proposed to explore the potential of oil and gas in the deep sea.
However, none of these initiatives came to fruition, leaving both shallow and deep-sea blocks untapped.
Bangladesh's maritime territory is divided into 26 blocks, comprising 15 deep-sea blocks and 11 shallow-sea blocks.
Several attempts over the years failed to achieve progress due to various challenges.
Currently, only the Indian company ONGC is conducting exploration in two blocks.
In 2014, Petrobangla signed two Production Sharing Contracts, or PSC, with ONGC for shallow-sea blocks 4 and 9, but the work is still ongoing.
In Dec 2016, South Korea’s POSCO Daewoo signed a PSC for Block 12 in the Bay of Bengal.
However, despite finding gas, they, like Australian company Santos before them, exited Bangladesh.
Faced with these challenges, the interim government is now determined to fast-track exploration efforts.
“We are prioritising this bidding process at the highest level,” Energy Advisor Fouzul told bdnews24.com.
“The outcome will depend on how many companies show interest, the quality of their proposals, and our analysis of them.”
When asked about the timeline for hiring an exploration company, he said: “Once we receive the proposals, we can provide a clearer timeframe. In preparation, we’ve already formed two committees. After receiving the bids, we’ll consider setting deadlines for their evaluations.
“This time, we aim to minimise delays and push the process forward as quickly as possible,” he said.
With industrial activities expanding, Bangladesh's gas demand continues to rise.
The national grid currently supplies 2,800 million cubic feet of gas daily, including 700-800 million cubic feet from imported LNG.
However, government estimates place daily demand at 3,600 to 3,800 million cubic feet.
To bridge this significant gap, the government has been focusing on increasing LNG imports through terminal installations.
If gas can be sourced from the Bay of Bengal, it could reduce dependence on costly LNG imports.
ELUSIVE POTENTIAL
In 2008, US-based ConocoPhillips secured leases for the DS-10 and DS-11 blocks in Bangladesh's deep sea.
After two years of exploration, the company sought higher gas prices through a contract revision.
Failing to reach an agreement with the government, it relinquished the blocks and left in 2014.
In Dec 2012, ConocoPhillips, along with Norway's Statoil, submitted a joint bid for DS-12, DS-16, and DS-21.
However, the blocks could not be leased after ConocoPhillips withdrew.
Around the same time, Petrobangla initiated a separate tender for shallow-sea blocks.
Block SS-11 was leased to Santos and KrisEnergy, while India’s ONGC Videsh, or OVL, and Oil India Limited, or OIL, took over blocks SS-4 and SS-9.
Santos, after conducting two-dimensional and three-dimensional surveys in SS-11, withdrew without drilling a well.
ONGC, which conducted 2D and 3D seismic surveys in its blocks, drilled an exploration well in SS-4 but found no gas.
The company is now preparing to drill two additional wells.
In 2016, South Korea's POSCO Daewoo discovered gas but proposed a price hike that fell outside the agreement terms, prompting the government to reject the offer.
Subsequently, the company exited Bangladesh.
According to the energy ministry, four of the 22 onshore blocks are currently being explored under production-sharing contracts with US-based Chevron and UK-based Tullow Oil.
Chevron is responsible for blocks 12, 13, and 14, while Tullow is working in block 9.
Bangladesh’s resolution of maritime boundary disputes with Myanmar and India in 2014 opened up 118,813 sq km of the Bay of Bengal for gas exploration.
The country was then divided into 48 blocks, with 22 onshore and 26 offshore.
Of the 26 offshore blocks, 11 are shallow-sea blocks located up to 150 km from the coast and within 200 metres of water depth.
The remaining 15 are deep-sea blocks, situated 150–400 km offshore, with water depths of up to 2,000 metres.
Despite efforts, offshore bidding rounds yielded no success. No tenders were issued from 2014 to 2019, even after the maritime victory.
A model PSC was drafted in 2019 but was scrapped due to a lack of contractor interest.
Amid growing urgency, the Cabinet Committee on Economic Affairs approved a draft policy for oil and gas exploration in June 2023.
Although there was speculation about tender announcements later that year, political considerations surrounding the 12th national election delayed the process.
On Mar 10, Petrobangla finally issued a tender based on the 2023 Model PSC.
It has since formed a seven-member committee, including a Dhaka University professor, energy ministry representatives, and experts, to manage the tender process.
An 11-member evaluation committee features representatives from Dhaka University, Bangladesh University of Engineering and Technology, or BUET, the minerals ministry, and a legal expert.
Petrobangla Chairman Zanendra said: “We will decide our next steps after evaluating the tenders. It’s best to avoid commenting further at this stage.”
NEW PSC
Wood Mackenzie analysed the conditions of the Bangladesh Offshore Model PSC 2019 and compared them with those of India, Myanmar, Bulgaria, the Philippines, Malaysia, Vietnam, Sierra Leone and Papua New Guinea before making recommendations on the new PSC.
A former director of PSC at Petrobangla said the price mechanism and price factors had been changed in the new model PSC.
The international companies’ production share had been raised by 5 percent, he said.
“It will be a win-win situation because both sides’ interests will be protected.”
The new PSC will prevent the price of gas from being raised above the global price of liquified natural gas or LNG.
In deep sea drilling, Bangladesh will get a maximum 65 percent of the gas after recovery of the investment.
The foreign company will have to prioritise Bangladesh in selling its share of the gas even if other countries’ offers are more profitable.
It may sell the gas to others if Bangladesh does not need the product at the time.
The PSC also has early cost recovery provision and the pricing will be adjusted to Brent indexing. The price will be 10 percent of Brent crude.
PREVIOUS PSCs
[Writing in English by Arshi Fatiha Quazi]
