Cairn drops plan to explore gas in Magnama, Hatiya this winter

FE Team | Published: September 04, 2008 00:00:00 | Updated: February 01, 2018 00:00:00

M Azizur RahmanbrThe UK-based Cairn Energy has dropped its planned exploration in new offshore structures in Magnama and Hatiya after Petrobangla showed its apathy to hike gas price or okay sale to private users.brThe move comes as a big blow to the country's future gas supply situation as the state-owned distribution giant Petrobangla has been struggling to meet soaring demand in factories and power plants.brThe country now runs supply shortfall of 200 million cubic feet of gas a day --- around 12 per cent of the total output --- which has resulted in shutdown of scores of industrial units and power plants. brWe have been waiting for a positive reply from Petrobangla on our proposals, said a company insider. brWith Petrobangla failing to approve the proposals, we have now decided to drop our planned explorations in new offshore structures in the coming winter, he said.brCairn last month sought either a higher price for its newly discovered gas in Magnama and Hatiya structures or a go-ahead signal from the government to sell the output to private users.brUnder the existing production-sharing contract (PSC), any company exploring gas in the country will have to sell its entire production to Petrobangla, which then sells the fuel to private and state-owned users. brCompany officials said Cairn had asked Petrobangla to respond by August 31, as it needed enough time to conduct seismic surveys in the new structures by a France-based contractor Grant Geophysics.brPetrobangla chairman Jalal Ahmed said the government was still examining Cairn's proposals, as they are unique in nature.brBut officials at Petrobangla said a delay in gas extraction from the two Cairn operated fields would be a big setback for the country's future gas supply scenario.brThe Petrobangla has expected that gas output from the two fields would mitigate the supply crunch in and around the Chittagong region, the country's main economic hub, within the next four years. brCairn and other oil companies operating in Bangladesh have been pressing for an upward adjustment for gas prices, arguing that the international price has doubled than the rate they are being paid by the Petrobangla.brCairn became the first company last month to openly demanding a rate hike, saying it would not be financially viable for it to sell its newly discovered gas at the price --- presently US$2.9 per unit--- set under the existing PSC.brAs per its planned exploration activities, Cairn was to conduct extensive three-dimensional seismic surveys in Magnama and Hatiya and subsequently drill appraisal wells in next winter to develop the fields for production.brMagnama and Hatiya structures are located in Bangladesh's shallow offshore gas block No. 16 and were awarded to Cairn Energy following the country's first round of bidding for oil and gas exploration in 1994.brA PSC was subsequently signed between the company and Petrobangla for exploring the block.brBut due to limited local gas market and a bar on export, Cairn did not go for exploring these fields until 2005. Instead, it extended the exploration deadline several times.brWith the local fuel demand growing over 10 per cent a year since 2003, the company is now interested to pour in millions of dollars in new exploration in the two structures.brThe company said it has found gas both in Magnama and Haitiya during exploration drilling in the winter of 2007-08 financial year. It however did not disclose the expected size of their reserve.brHowever, seismic surveys conducted by Cairn in the two structures in 2005 indicated potential gas reserves of around 5.26 trillion cubic feet (Tcf). brThere are possibilities of finding gas reserves of about 3.5 Tcf at Magnama and 1.76 Tcf at Hatiya, Cairn said after the preliminary seismic surveys in 2006.brCairn now operates the country's only offshore gas field Sangu some 20 kilometers off the Chittagong seashore.brGas production from Sangu slumped to 46 million cubic feet a day (mmcfd) Wednesday from its average production of 180 mmcfd during 2006, hitting the supply situation across Chittagong.brCairn is selling gas to Petrobangla at about $2.9 per unit from Sangu field.br