The government is set to award two shallow water blocks to India's ONGC Videsh Ltd today (Monday) for oil and gas exploration after one year of floating the bidding.
State-owned Petrobangla will ink two production sharing contracts (PSCs) with the ONGC for two shallow water blocks-SS-04 and SS-09 -- in the Bay of Bengal, a senior Petrobangla official said Sunday.
Under the PSCs, ONGC Videsh will have rights to explore Bangladesh's first discovered offshore gas field, Kutubdia, as well.
Kutubdia was offered under a 'special package' and was tagged with SS-04 during the bidding round.
ONGC Videsh has committed to spend US$58 million for block SS-04 and carry out 2,700 km-long 2D seismic survey, 200 sq km 3D and drill two wells during the contract period.
For block SS-09, ONGC has agreed to spend $85 million and conduct at least 2,850 km-long 2D seismic survey, 300 sq km 3D and drill three wells during the contract period.
ONGC Videsh had submitted bids for these two shallow-water blocks out of nine that were offered by Bangladesh in the latest bidding round in December 2012.
With the signing of PSCs the Indian company will be able to enter into Bangladesh's oil and gas exploration activities.
The contract period for exploration will be eight years with a five-year initial period and a three-year subsequent exploration.
The contractors will be allowed to operate and sell oil and gas for 20 years from an oil field and 25 years from a gas field.
Wellhead gas prices in Bangladesh are pegged to high sulphur fuel oil (HSFO) prices in the international market, while oil prices are determined on the basis of a 'fair market value' as agreed by both contractors and state-owned Petrobangla.
The floor price for HSFO has been fixed at $100 per tonne and the ceiling price at $200 per tonne.
The latter is worked out of around $5.50 per Mcf (1,000 cubic feet) besides a 37.5 per cent corporate tax that has to be paid by the contractor.
Other features of the PSC are: the licence holder will have right to full repatriation of profits without any signature bonus or royalty and need not to pay duty for equipment and machinery imported for operations during the exploration, development and production phases and will have 100% cost recovery and production bonuses, the official said.
The contractor can also sell gas independently to third parties instead of going through state-run Petrobangla.
The company will be allowed to market the gas domestically as well, but Petrobangla will have the first right of refusal.
Bangladesh needs new exploration to meet growing natural gas demand.
The country's offshore gas output turned 'zero' from October 1 last when the operation of the Sangu-11 gas well was shut permanently after years of production slumps.
