Petrobangla reopens int'l bid for 3 blocks in Bay by next week

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M Azizur Rahman State-owned Petrobangla is set to re-open international tender for three deepwater blocks in the Bay of Bengal by next week under new production sharing contract (PSC) terms to attract international oil companies (IOCs) to take part in the bidding, a top official said Saturday. It might offer a three months' time to submit bids by the interested IOCs and close it by late January 2014, said the Petrobangla official. He said all the formalities to re-launch bidding in three deep water blocks --DS-12, DS-16 and DS-21 - have almost been completed. The government has already finalised its PSC for deepwater blocks, further relaxing terms to include a minimum guaranteed annual hike in wellhead hydrocarbon prices and exemption from gas transmission charges. Under the new PSC well-head oil and gas prices from deepwater blocks will increase by at least 2.0 per cent annually from the start of production. Wellhead gas prices in Bangladesh are pegged to high sulfur fuel oil (HSFO) prices in the international market, while oil prices are determined on the basis of a 'fair market value' as agreed upon by both contractors and state-owned Petrobangla. As part of the new PSC terms, international oil companies, developing deepwater blocks, will also be exempt from paying a wheeling charge to Petrobangla to transport natural gas to end-users within the country. Currently, the wheeling charge is applied at a rate of 4.0 per cent of the gas price. The amended terms also contain a provision that requires the IOCs to transfer some technology and recruit more local people in their upstream operations within the country. Petrobangla had offered these three deepwater blocks along with nine shallow water blocks during December 2012 licencing round. It suspended bidding on the three deepwater blocks -- to review the PSC terms -- after they showed no interest in the country's licencing round that closed on April 2. Petrobangla received bids for only three of the nine shallow water blocks also on offer in the licencing round, after extending the initial bid submission deadline of March 18. It again offered six shallow water blocks on the original terms and received one bid. In the new PSC terms for the deepwater blocks, Petrobangla raised the HSFO ceiling price in the gas price formula, including a tax holiday for companies, allowing direct sales of hydrocarbons to third parties bypassing Petrobangla and raising the cost recovery limit. Currently, all the natural gas produced in Bangladesh comes from onshore gas fields which contribute around 2,300 million cubic feet per day (mmcfd) of gas, against the overall demand of over 2,700 mmcfd. The country's gas production from offshore gas block came to 'zero' with the permanent closure of Sangu-11 gas well in the Bay of Bengal on October 1. It awarded only two deep water blocks - DS-08-10 and DS-08-11 - to US's ConocoPhillips in June 2012. The newly assigned US contractor has just completed 2D survey in two deepwater blocks. Bangladesh urgently needs new energy sources, and unless new gas fields are discovered, the country's recoverable gas reserves of 16.36 trillion cubic feet (Tcf) are set to be exhausted within the next decade. The shortage of gas has pushed Petrobangla to ration gas supply to existing industries and restrict supplies to new industries.