Decision to modify draft PSC to entice more IOC participation

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M Azizur Rahman
An inter-ministerial meeting decided Thursday to modify the draft production-sharing contract (PSC) to entice international oil companies (IOCs) to participate in the upcoming offshore bidding.
"Gas pricing, categorisation of the offshore gas blocks and corporate tax rate are among the issues the inter-ministerial meeting recommended for revision in the draft PSC," a senior official of the Energy and Mineral Resources Division (EMRD) told the FE.
He said the Thursday's meeting recommended a hike in the gas prices after fixing upper and lower slabs to encourage the IOCs to explore offshore gas fields which, the energy experts believe, have huge reserve potentials.
The state-owned Petrobangla will purchase natural gas from the IOCs, which will supply gas after exploration in the offshore gas blocks in the Bay of Bengal, in line with the provisions of the PSC to be signed between the concerned parties after completion of the bidding round- 2007.
"The price might be over US$4.0 per unit (1,000 million cubic feet per day)," said an EMRD official.
He said the meeting proposed the hike considering the soaring energy prices in the international market as by the time IOCs will start supplying the gas prices might go up.
Besides, in the recently held bidding round the neighbouring countries have enhanced the gas prices for the IOCs, he said justifying the recommendation.
The country's offshore gas blocks will be of two categories - A type and B type - as per the decision of the Thursday's meeting.
A total of 20 offshore gas blocks belong to 'A' category, which are located from the seashore to 20 degree north latitude into the Bay of Bengal.
The 'B' category consists of seven deep offshore gas blocks that are located from 20 degree north latitude to 18 degree north latitude in the Bay, meeting sources said.
The bid winning IOCs will get a total of eight years, instead of the existing seven years, to complete exploration and initiate supplying of gas from the offshore gas fields, under the modified PSC.
For A category gas blocks the IOCs must have to dig well and complete necessary seismic survey within four years of signing the PSC.
While for B type gas blocks - which are located deeper into the Bay - digging well is not mandatory within four years. The IOCs, will, however, have to complete seismic survey and other necessary exploration within the timeframe.
The inter-ministerial meeting has recommended fixation of corporate tax payable by the IOCs.
Currently, the IOCs do not pay corporate tax as the state-run Petrobangla pays such tax to the National Board of Revenue (NBR) on the IOCs behalf.
The meeting also discussed the report of Dr Kamal Hossain and Associates, which submitted it after reviewing the draft PSC, last month.
A similar inter-ministerial meeting last year finalised the draft PSC, prepared in line with the PSCs of neighbouring countries.
Petrobangla will modify the draft PSC as per the recommendations of Thursday's meeting and send it to the EMRD by this month.
The EMRD will seek opinions from all concerned before sending it to the Council of Advisers for final approval.
Chaired by EMRD Secretary AMM Nasir Uddin, the meeting was attended by top officials of the Ministry of Finance, Ministry of Law, NBR, Petrobangla and the EMRD.