The government is set to award the shallow water block SS-07 to US oil and gas giant ConocoPhillips in April, a top government official said.
The ConocoPhillips has committed to spend US$40 million including bank guarantee of the same amount for oil and gas exploration in shallow water in the Bay of Bengal.
The US firm has already inked an initial agreement of the PSC and agreed to conduct at least 2,347 line km 2D seismic survey, 500 sq km 3D and drill one well during the contract period.
The ConocoPhillips submitted bid for one shallow-water block out of nine which were offered by Bangladesh in the latest bidding in December 2012.
The new shallow water block will, however, be the third offshore gas block of the ConocoPhillips in Bangladesh as it was already awarded two deep water blocks DS-08-10 and DS-08-11 in the country's previous 2008 bidding.
The ConocoPhillips has already started exploration in its two deep water blocks.
The PSC with the ConocoPhillips will be followed by the award of three shallow water blocks of which SS-04 and SS-09 were awarded to a JV comprising India's ONGC Videsh Limited and Oil India Limited and SS-11 to a joint venture of Australia's Santos and Singapore's KrisEnergy in the past one month.
The Petrobangla's subsidiary, the Bangladesh Petroleum Exploration and Production Company Ltd., will have 10 per cent carried interest in the shallow water block.
The contract period for exploration will be eight years.
The contractor will be allowed to operate and sell oil and gas for 20 years from an oil field and 25 years from a gas field.
The price of gas in Bangladesh is pegged to that of high sulphur fuel oil in the international market, while oil prices are determined as a fair market value agreed on by the companies and the Petrobangla.
The floor price of HSFO has been fixed at $100, which is capped at $200.
The PSC also will allow the license holder the right to full repatriation of profits, not paying any signature bonus or royalty nor duty on equipment and machinery imported for exploration, development and production.
Companies will also have 100 per cent cost recovery.
Contractors can also sell gas directly to third parties, subject to the Petrobangla's right of first refusal.
But hydrocarbons produced from the shallow water blocks must be sold in the domestic market as exports are prohibited under the PSCs.
Currently, the overall natural gas output of around 2,300 million cubic feet per day (mmcfd) comes from onshore gas fields alone.
The country's offshore natural gas output came to 'zero' from October 2012, after around 14 years of production, when the Santos-operated Sangu-11 gas well in the Bay of Bengal was shut permanently.
