The state-run Petrobangla will make a presentation before Prime Minister Sheikh Hasina on the final draft of model production-sharing contract (PSC) for offshore exploration - before placing it to the Cabinet Committee on Economic Affairs for approval.
"We have finalised the model PSC draft and will present it to the PM next week before the cabinet's approval," Petrobangla Chairman Zanendra Nath Sarker told the FE on Thursday.
The PM is also in-charge of the Ministry of Power, Energy and Mineral Resources (MPEMR), he said.
Bangladesh is all set to offer the international oil companies (IOCs) an enhanced output share and excess gas export facility in a package of bigger bets through the new model contract, as domestic fuel exploration is deemed urgent.
The drafted PSC has coined increased benefit to attract the foreign explorers, at a time when the government is augmenting import of expensive liquefied natural gas (LNG) from global spot market to feed gas-guzzling industries and power plants.
The country will have to purchase natural gas from the future overseas exploration contractors at around three times higher price than the current price. It is hiking the price linking the same benchmark used to buy expensive LNG without capping, the Petrobangla insiders said.
Seeing the potentials of enhanced tariff structure, the US-based oil super-major ExxonMobil has placed a proposal to explore all the 15 deep-sea blocks in the Bay of Bengal.
The PM also gave a go-ahead for initiating negotiation with ExxonMobil, MPEMR State Minister Nasrul Hamid told newsmen a couple of weeks back.
"But we are yet to get any instruction from the MPEMR to initiate negotiation with ExxonMobil," said the Petrobangla top brass.
The Petrobangla is now keen to get the model PSC approved by the cabinet committee within this month, said Mr Sarker.
"We'll launch an offshore bidding round immediately after getting the cabinet's nod," he said.
As per the model PSC final draft, the foreign companies, to be operational in future offshore exploration jobs, will also have the liberty to export natural gas after meeting domestic demand.
"Capping-free price means Bangladesh will have to purchase the gas, to be produced by the contractors, at a rate as high as it goes or as low as it slips," one of the sources said.
The Petrobangla has drafted the latest model PSC by linking its gas purchase price from the oil companies with Brent crude - the benchmark used to purchase LNG from the international market.
It has drafted a formula - Brent crude price plus 10 per cent - to fix the gas purchase price from the IOCs, said sources.
The Petrobangla's offered price to the IOCs will be around US$10 per Mcf (1,000 cubic feet), which is around three times higher than the current purchasing price of below $3.0 per Mcf from the IOCs.
Currently, Brent crude price in the international market is around $75 per barrel. It boiled up as high as $126 per barrel immediately after the Russia-Ukraine war breakout in March last year.
"The pricing formula will be applicable to hydrocarbon (HC) exploration - both in shallow-water and deep-water blocks," a senior energy ministry official said.
In the existing model PSC, natural gas prices for the IOCs are pegged to high-sulfur fuel-oil (HSFO) prices in the global market. For shallow-water and deep-water offshore blocks, the ceiling price for HSFO is $215 per tonne, in accordance with the model PSC 2012. The floor price is $100 per tonne.
Gas price for deep-sea blocks, however, was set to rise by 1.5 per cent from the date of first gas output under the existing model PSC, with annual escalation.
In the existing PSC, the price of natural gas, to be produced from onshore, shallow-sea and deep-sea gas blocks, were kept unchanged at 75 per cent, 100 per cent, and 130 per cent of market price respectively - as defined in the Asian Petroleum Price Index.
In the drafted model PSC for the next bidding round, the Petrobangla has proposed to reduce the government's share in 'profit gas' to 40-70 per cent from the previous contact's 55-80 per cent.
Profit gas means the available gas after the quantity corresponding to the value required for royalty payments, and the investor has taken the cost gas under the PSC terms.
The Petrobangla also proposed narrowing down differences of exploration benefits between deep-sea and shallow-sea blocks to attract the IOCs to take part in the next offshore bidding round.
Currently, Bangladesh's LNG import price under long-term contracts with Qatargas and Oman Trading International ranges around $10 per million British thermal unit (MMBTu), said the Petrobangla official.
The government raised the natural gas tariffs by up to 178.88 per cent in February through an executive order to 'adjust government subsidy and provide uninterrupted gas supply to clients'.
The officials said the latest bid is aimed at roping in the companies to take part in the ensuing offshore bidding round for hydrocarbon exploration in the Bay.
The Petrobangla floated the last bidding round in 2012, through which three shallow-water blocks and one deep-water block were awarded to contractors. Currently, four IOCs have active PSCs, either individually or under joint venture, to explore three shallow-water blocks.
ONGC Videsh Ltd (OVL) and Oil India Ltd (OIL) are jointly exploring shallow-water blocks SS-04 and SS-09. US oil-major Chevron is active in exploring and producing natural gas in three gas-fields under onshore blocks 12, 13 and 14. Singapore's KrisEnergy is producing natural gas from Bangura field under block 9.
Bangladesh currently has a total of 26 open blocks in offshore areas, of which 11 are located in shallow water and the remaining 15 in deep water.
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