Santos can sell gas to 3rd party under revised deal

The government has allowed Santos as the first foreign company operating in the country to sell gas from its offshore fields in block 16 in the Bay of Bengal to private buyers at market prices. State-owned Petrobangla signed an amendment to existing gas purchase and sales agreement (GPSA) Monday allowing the Australian firm to sell its gas directly to private entrepreneurs bypassing Petrobangla. The revised deal has cleared all legal barriers to sell gas by the Australian firm to private buyers in Bangladesh, said a senior energy ministry official. Currently, all foreign companies operating in the country sell their gas output to Petrobangla, which then sells it to state-owned gas distribution companies to reach end-users. President of Santos Bangladesh Ltd John Chambers signed the GPSA amendment deal on behalf of Santos, while Petrobangla Secretary MD Imam Hossain signed it on Petrobangla's behalf at Petrobangla office in Dhaka. Santos has already offered to private buyers of Chittagong a 55 per cent higher price for gas from its offshore fields in Bangladesh's block 16 at US$ 4.50 per unit (1,000 cubic feet) from the previous $ 2.90 per unit. Prior to the GPSA amendment deal, Santos could sell its gas only to Petrobangla at a maximum price of $2.90 per unit. Bangladesh's leading private entrepreneurs especially of energy-starved port city Chittagong have shown interest to get gas from Santos even at the higher price, Chittagong Chamber of Commerce and Industry (CCCI) Senior Vice Pesident Mahbubul Alam told the FE. But the buyers wanted to know the volume of gas and wanted that the supply would be uninterrupted, he said. Existing gas supply shortfall is affecting production in 832 industrial units, 104 captive power plants and 23 compressed naturas gas (CNG) filling stations in Chittagong. Gas demand in Chittagong is over 350 million cubic feet per day (mmcfd) but Petrobangla can provide around 250 mmcfd of gas, said Alam. "Scores of industries have stopped production due to gas supply shortfall and expansion of industrial units has been halted for the past several years," said the CCCI leader. Santos had sought an amendment to the GPSA in early this year, saying it needed a government decision on the matter before it could begin exploration in the offshore gas fields. "We will start the planned drilling in three exploration wells -- Sangu 11, South Sangu and Magnama -- in block 16 by October," John Chambers said. Santos has almost completed all necessary deals with rig, helicopter and ship providers, which will enable drilling to commence on schedule, said a company official. "I hope Santos will be able to complete its drilling on schedule," Petrobangla Chairman Dr Hussain Monsur said after signing the GPSA amendment. Santos along with its previous partner UK's Cairn Energy had spotted three gas prospects, Sangu 11, South Sangu and Magnama in block 16 after 3-D seismic surveys, and decided to complete drilling in these three wells by April 2012. In December 2010, Petrobangla approved Santos' $110 million investment plan for drilling in the three prospective locations stretching over 8,621 sq km in the Bay of Bengal. Santos acquired Cairn Energy's interests in November last year. Following the acquisition, Santos has become the operator of Bangladesh's only offshore operating gas field Sangu. Santos has a 75 per cent stake in Sangu while Halliburton Energy has 25 per cent stake. Santos alone also owns the Magnama and Hatiya structures in Block 16.