Norwegian firm Statoil has sought more rewarding fiscal terms from the government to ink production-sharing contract (PSC) for hydrocarbon exploration in three deepwater blocks in the Bay of Bengal, said officials.
Statoil pleas happen to be latest in a series of bargains by international oil companies (IOCs) for enhanced fiscal benefits in striking hydrocarbons in the offshore blocks.
A team from Statoil held a meeting with state-run Petrobangla top officials recently, seeking fiscal incentives above provisions of the model PSC, a senior Petrobangla official told the FE.
He said the demands raised by the firm were almost similar to those raised by the US ConocoPhillips and Norwegian joint venture (JV) last year.
Government's reluctance to concede to the demands led to pullout of the US firm from the JV for exploration in the deepwater blocks DS-12, DS-16 and DS-21.
The demands include allowing an annual 2.0 per cent gas-price rise to kick in before first production begins.
Statoil also sought that Petrobangla would bear the costs of building an offshore pipeline to carry natural gas to be produced in the deepwater blocks to shore.
It sought price adjustments in line with the rate of annual inflation.
Officials said after the exit of the ConocoPhillips, Statoil showed interest to ink PSCs alone to carry out exploration in the bay blocks.
Petrobangla had sought government nod subsequently to award these blocks to the Norwegian oil-and-gas firm.
It held the meeting with Statoil officials after getting the go-ahead from the Energy and Mineral Resources Division (EMRD) under the Ministry of Power, Energy and Mineral Resources.
Petrobangla had earlier awarded the JV the job of exploring oil and gas in the three blocks under the 2012 bidding round and invited to ink PSCs.
But ConocoPhillips backed out from signing the PSCs by citing 'poor fiscal terms.'
"Unfortunately, Bangladesh is no longer a strategic fit in our portfolio," ConocoPhillips managing director for Bangladesh operations Tom Early had told the FE in an email interview after its pullout decision.
ConocoPhillips and Statoil had 50:50 stakes in the JV and with the pulling out of the US firm Statoil would own all 100 per cent stakes.
The annual hike in gas price by 2.0 per cent from first gas production was one of the revised provisions made by Petrobangla to lure international oil companies in to the three blocks under the 2012 bidding round, he said.
The government would have to amend the existing model PSC to fulfill Statoil's demand and engage them in hydrocarbon exploration in the blocks.
If inked, the PSC will be the Statoil's first-ever contract to get involved with the oil-and-gas-exploration activities in Bangladesh.
Petrobangla invited bids in December 2012 from the international oil companies for a total of 12 offshore blocks, including these three deepwater blocks. The rest nine are in shallow water.
Bangladesh later suspended the bidding process for these deepwater blocks and re-launched the bidding for them again in October 2013 after revising the fiscal terms and other benefits, he said.
The JV of ConocoPhillips and Statoil had submitted bids and emerged single bidder for all the three deepwater blocks offered under that bidding round.
Bangladesh is currently dependent on onshore fields for its entire natural gas output.
Gas production at present is running at about 2,640 million cubic feet per day (mmcfd) against the demand for above 3,000 mmcfd.
Short supply of natural gas has prompted the government to ration supplies to industries, power plants and fertilizer factories to make do with the limited output.
mazizur.rahman@outlook.com
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