Bangladesh is preparing to launch its first onshore oil-and-gas bidding round in nearly three decades as the government seeks to accelerate exploration, reverse declining domestic gas output and reduce dependence on costly energy imports.
The government has moved to launch an onshore bidding round to boost the country's natural gas production from domestic fields.
State-run Petrobangla has already submitted a draft Model Production Sharing Contract (MPSC) to the Energy and Mineral Resources Division (EMRD) under the Ministry of Power, Energy and Mineral Resources (MPEMR), Petrobangla Director (PSC) Md Shoeb told The Financial Express on Sunday.
"After launching the offshore bidding round, we are now preparing to invite international tenders for oil and gas exploration in onshore blocks, including both plain-land and hilly areas," he said.
Increasing gas production from domestic fields has become crucial amid declining output and rising demand from industries, power plants and other major consumers, he added.
Sources said Bangladesh has not held an onshore bidding round for hydrocarbon exploration in the past 28 years.
The Energy and Mineral Resources Division is currently evaluating the draft MPSC prepared for the proposed onshore bidding round, according to Petrobangla officials.
The contractual terms have been made more attractive for international oil companies (IOCs) in line with recommendations from global energy consultancy Wood Mackenzie.
Mr Shoeb did not disclose the number of blocks to be offered or the expected timeline for the tender.
Under the proposed MPSC, the gas purchase price payable to IOCs will be linked to dated Brent crude prices based on a three-month rolling average.
For exploration blocks located in plain-land areas, the gas price would be set at around 8.0 per cent of the dated Brent crude price, while for hilly areas it would be 8.5 per cent, according to the draft contract.
The previous MPSC, introduced in 1997, linked gas prices to high sulphur fuel oil (HSFO) and included both floor and ceiling price limits.
Based on current Brent crude prices, the proposed formula would result in a gas price of more than US$7.0 per million British thermal units (MMBtu).
If approved, the new pricing mechanism would make gas from future onshore blocks nearly three times more expensive than the existing onshore rate of around US$2.76 per MMBtu.
US energy major Chevron Corporation currently receives about US$2.76 per MMBtu for gas sold to Petrobangla, while KrisEnergy Ltd receives around US$2.31 per MMBtu under the HSFO-linked pricing formula.
During the last onshore bidding round in 1997, four blocks - Block 5, Block 7, Block 9 and Block 10 - were awarded to international operators.
At present, two IOCs hold active production sharing contracts, either independently or jointly, covering four onshore blocks.
Chevron operates three onshore gas fields under Blocks 12, 13 and 14, while KrisEnergy produces gas from the Bangora field under Block 9.
Petrobangla launched its latest offshore bidding round on 24 May, offering 26 exploration blocks in the Bay of Bengal as part of a broader effort to attract foreign investment and increase domestic energy supplies.
Azizjst@yahoo.com
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