Bangladesh's deep sea has turned 'idle' again in terms of hydrocarbon exploration as the maiden deal with South Korean Posco International has become void.
With the exit of Posco from block DS-12, the country's oil and gas exploration activities in offshore areas are now limited to only several shallow water blocks which are also going on at a snail's pace, insiders said.
Non-engagement of the deep sea offshore blocks even after eight years of settling the maritime dispute with Myanmar and six years of settling dispute with India is unfortunate, said energy expert Dr M Tamim.
"We lost the opportunity to award deep sea blocks to potential global contractors around a decade back when we initiated the process of importing LNG," he added.
If Petrobangla could carry out the necessary non-exclusive seismic survey in offshore blocks, the oil and gas exploration companies could have been interested, he said.
Mr Tamim, however, said under the current situation of global coronavirus pandemic and subsequent fall in oil and gas prices, very few firms will show interest to engage in deep sea exploration.
Posco's contract turned vacant due to its 'failure' to carry out exploration as per the deal, said a senior Petrobangla official.
Petrobangla earlier had opined for terminating the production sharing contract, or PSC, with the Posco as the penalty.
Instead of carrying out exploration work as per the contract, the Korean firm had sought a review of the 'commercial terms' seeking a favourable cost recovery provision of the PSC, he said.
It also sought an extension of the contract for another year with higher 'commercial terms', but Petrobangla refused to amend the PSC.
Market insiders said the Korean firm previously intended to explore the deep sea block through hooking up with a partner so as to minimise the costs.
It also talked with Australian Santos to establish a joint venture to this end. But Santos turned down the proposal as the Australian firm itself was planning to pull out of its Bangladesh operations with regard to the shallow water blocks.
The Posco-Daewoo Corporation, a joint venture of Korean Posco and Daewoo, had inked the PSC in December 2016 with the Petrobangla under the Speedy Supply of Power and Energy (Special Provisions) Act 2010 bypassing tendering process.
Posco later acquired Daewoo to become the lone stakeholder of the deep sea block DS-12.
Under the PSC, the Posco was entitled to get natural gas price at around US$6.50 per mm Btu (million British thermal unit) with a 2.0 per cent annual price escalation from the date of first gas production.
Posco carried out 2D or two-dimensional seismic survey in around 3,580 kilometre areas, which are double its committed area for the survey, before exit.
The Korean company could detect around half a dozen potential spots having hydrocarbon reserves through the 2D survey, it claimed.
Petrobangla had earlier awarded the DS-12 block along with two other deepwater blocks, DS-16 and DS-21, to a joint venture of the US's ConocoPhillips and Norwegian Statoil under the previous 2012 bidding round.
But both ConocoPhillips and Statoil refused to ink a PSC on 'poor fiscal terms' in the model contract.
DS-12 is located in a depth of 1,000 to 2,000 metres, with an area of 3,560 sq km.
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