Australian Santos and Singaporean KrisEnergy are all set to relinquish Bangladesh's shallow water block SS-11 with the existing contract for its exploration expiring in March 2021.
Santos and KrisEnergy neither submitted any plan to carry out exploration nor proposed to extend the tenure of its production sharing contract (PSC) for the block, a senior Petrobangla official told the FE on Monday.
The SS-11 will be the second offshore block that international oil companies (IOCs) are relinquishing after South Korean Posco International's deep water block DS-12 within a year.
With the relinquishment of two offshore gas blocks, Bangladesh will have only two offshore blocks - SS-04 and SS-09 - under PSC, where the operator is Indian ONGC Videsh Ltd.
Santos and KrisEnergy each have 45 per cent stakes in offshore sea block SS-11. The remaining 10 per cent stake is owned by the state-run Bangladesh Petroleum Exploration and Production Company Ltd (Bapex) as carried over interest.
Santos also has 51 per cent stake over Magnama-2 well under block-16, while the remaining 49 per cent stake is owned by Bapex.
Early this year, Petrobangla opted for terminating PSC with Posco for block DS-12, as it did not carry out exploration job under contractual obligation within its contract period.
Instead of carrying out exploration as per contract, Posco had sought a review of the commercial term, seeking a favourable cost recovery provision of the PSC.
But Petrobangla refused to amend the PSC, resulting in termination of the contract.
Santos-KrisEnergy, however, did not seek any amendment to the PSC, seeking better commercial term, Petrobangla sources said.
The Australian firm intended to sell its entire stakes as well as the operatorship of its block to the Singaporean firm before leaving, but failed in doing so, they also said.
Santos's Magnama-2 well under block-16 will go to Bapex, as the Australian firm will be winding up its Bangladesh operations.
KrisEnergy, however, has 30 per cent working interest with onshore gas block-9, which is producing around 92 million cubic feet per day (mmcfd) of gas from Bangora gas-field.
Santos initiated its Bangladesh operations in late 2010 by acquiring stakes of Scottish Cairn Energy's interests in the country.
Officials said Petrobangla recently reminded Santos and its joint venture (JV) partner KrisEnergy to carry out their mandatory drilling programme as part of contractual obligation.
The JV's bank guarantee worth US$11 million might be confiscated, if it fails to carry out oil and gas exploration as per the PSC, signed between the parties.
Santos and KrisEnergy had inked the PSC to carry out hydrocarbon exploration in shallow-depth offshore sea block SS-11 in the Bay of Bengal on March 12, 2014 with a five-year exploration period, which expired on March 11, 2019.
The PSC tenure got a two-year extension until March 2021.
The JV had committed to drilling an exploratory well and carrying out 1,876 line kilometre (LKM) two-dimensional (2D) seismic survey and 300 square kilometre 3D survey during the five-year contractual period.
It carried out 2D seismic survey in 3,220 LKM areas in 2017 and identified prospects that wooed it to conduct 3D seismic survey in around 305 square kilometre areas to explore hydrocarbon in shallow water in the sea.
The JV carried out mandatory drilling of an exploratory well within its contract period.
Santos, earlier in 2017, drilled an exploration well in Magnama-2 under a JV partnership with Bapex, but failed to discover a commercially viable hydrocarbon reserve. Magnama-2 structure is located near the offshore Sangu well.
Santos claimed to have delineated a semi-commercial discovery there, although it did not undertake any subsequent programme for further exploration.
Santos's predecessor - Cairn Energy - had discovered natural gas prospects in Magnama, penetrated by a single exploration well, around a decade ago.
Cairn drilled the exploration well in Magnama in 2008, and subsequently carried out a 2D seismic survey in 213 LKM areas in early 2010.
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