US oil and gas firm Chevron has abandoned its US$650 million investment plan for raising further natural gas production from its onshore gas fields in northeastern Sylhet region after its plea for annual tariff hike for Bibiyana gas was rejected, a top official said.
Chevron had submitted the investment proposal to state-owned Petrobangla for installing one new compression station in the Bibiyana gas field and drilling three more wells in the Jalalabad gas field. But it tagged the condition of annual tariff hike by 3.0 per cent for Bibiyana gas and PSC tenure extension for five more years.
"We rejected Chevron's proposal as there is no such provision for raising natural gas tariff in the production sharing contracts (PSCs) inked with the US firm," Petrobangla director for PSC Md Quamruzzaman told the FE Tuesday.
The existing PSC with Chevron is required to be amended to allow the US firm the increased natural gas tariff, he said.
The US firm was seeking to raise natural gas tariff for its Bibiyana gas field by 3.0 per cent annually and extending tenure of the PSCs up to 2034.
Bibiyana is the country's largest producing gas field, which is supplying around 1,000 million cubic feet per day (mmcfd) of gas accounting for over 40 per cent of the country's overall natural gas output of around 2,480 mmcfd as of January 12, 2015.
Chevron is currently getting US$2.76 per Mcf (1,000 cubic feet) for gas from the Bibiyana field.
The PSC tenure with Chevron will expire in 2029, as per the terms.
Currently all the international oil companies operating in Bangladesh sell their portion of natural gas in line with their respective PSCs without any provision of annual hike in gas tariff.
Chevron also had sought more areas near its Jalalabad gas field in the same region of the country to carry out additional exploration, said the official.
It also had sought to drill deeper than 3,100 metres in Jalalabad gas field to explore more, the official added.
The Petrobangla, however, turned down both these proposals of Chevron too, said Quamruzzaman. "It is a matter of policy of the government", said Professor M Tamim of the Bangladesh University of Engineering and Technology (BUET).
It is good that the Petrobangla did not opt for amending the PSC, he said.
He also said a 3.0 per cent hike in natural gas tariff is not much considering the gas price in international market.
"If there is any scope of re-negotiation in the PSC for future investment, it will not be harmful," said Mr Tamim, who was the special assistant of the Chief Adviser of the previous caretaker government.
Chevron Bangladesh's immediate past President Geoffrey Strong earlier told the FE in November that it was eying further investment in oil and gas exploration activities in Bangladesh to meet the country's mounting energy demand.
The US firm announced exploitation of first gas in October 2014 under its $500 million Bibiyana Expansion Project which it initiated in 2012.
The US oil and gas major has already invested around $1.5 billion in oil and gas activities in Bangladesh in the past decade, Mr Strong had said.
"The country requires an increase in exploration and development efforts for the lowest cost of energy source -- which is domestically produced natural gas -- to address its current primary energy crisis," Mr Strong had said then supporting the increased investment plan.
Domestically-produced natural gas is currently about one-fifth of the cost of imported fuels such as diesel, furnace oil, LPG and LNG, he said.
Chevron operates three gas fields and a compressor station, all located in the Sylhet region of northeast Bangladesh.
The Bibiyana Expansion Project is the largest foreign investment project in Bangladesh's history, Mr Strong had said.
Once fully operational by the end of 2015, the project will deliver an additional 300 mmcfd of natural gas, and 4,000 barrels of condensate, he had said. In Jalalabad, Chevron had planned to complete drilling of three new producing wells by early this year.
These new wells were to help maintain the current production levels at Jalalabad for a few more years.
Chevron is the largest producer of natural gas in Bangladesh, currently delivering around 1, 300 mmcfd of gas accounting over 52 per cent of the country's total supply, according to Petrobangla data as of January 12, 2015 from three of its onshore gas fields -- Bibiyana, Jalalabad and Moulvibazar -- located in blocks 12, 13 and 14 respectively in the Sylhet region.
The country's overall natural gas demand is around 3,000 mmcfd.
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