An IOC-pampering model deal gets thru anytime

Long-delayed hydrocarbon search in the bay no longer looks far off as an IOC-pampering new model production-sharing contract (PSC) may be approved by Bangladesh government anytime soon.
Sources have said the model PSC for deal-making with international oil companies (IOCs) now awaits the nod from the cabinet committee on economic affairs.
“It may be placed before the cabinet committee on economic affairs anytime soon,” Petrobangla chairman Zanendra Nath Sarker told the FE Wednesday.
He said the seal of approval by the cabinet committee would expedite the launch of the country’s long-awaited bidding round to explore oil and gas deep into the Bay of Bengal.
Under the new draft contract, Petrobangla will purchase hydrocarbons from exploration contractors at more than three times the current price of around US$2.75 per million British Thermal unit (MMBtu) as it is linking the price with same benchmark used to buy expensive liquefied natural gas (LNG) without capping, said sources.
Under the proposed pricing formula, the corporation’s offered buying price to IOCs will be around US$7.6 per MMBtu as per the current global Brent crude price at US$ 76 per barrel.
In the draft model PSC, which is expected to be used in the next bidding round, Petrobangla has proposed to fix the hydrocarbon price at 10 per cent of the three- month average Brent crude price.   
It has also proposed to reduce government share in ‘profit gas’ to around 40 per cent from 70 per cent in previous contacts.
Sources said Bangladesh had not yet decided as to how many offshore blocks it will offer in the ensuing offshore-exploration bidding round.
The country recently has completed multi-client survey in over one-third of Bangladesh’s total sea area to delineate hydrocarbon reserves and outcome rollout is awaited while an acute primary-fuel crunch cripples the economy.
“We have completed 2D (two-dimensional) seismic survey in around 13,000 line-kilometer (LKM) area of our sea territory,” the Petrobangla chairman said, adding that the results will be available by August.
The contractor, Tomlinson Geophysical Services Inc (TGS)-Schlumberger, a Norway-US joint venture (JV), is contractually bound to carry out survey in 32,000-LKM area.
The JV firm will carry out seismic survey in the remaining 19,000-LKM area from February 2024, said Mr Sarker.
The contractor had initiated the survey at the fag-end of its contractually obligated deadline for completion of the survey and completed it only recently. Experts of the JV firm are now assessing data of its surveyed area before rolling out the results.
“Through this survey the firm will be able to say primarily about presence of hydrocarbon deposit, if any, in the Bay,” said the official.
Actual discovery of hydrocarbons could be ascertained only after carrying out 3D (three-dimensional) seismic survey and necessary drilling of wells in potential spots, he added.
Petrobangla would provide the survey output to interested IOCs with the non-exclusive multi-client seismic data of the offshore blocks to help them carry out basin evaluation, prospect generation, and participation in the upcoming bidding for exploration.
As per the contractual terms, the JV surveyor would not get any payment from Petrobangla for its work, but would be free to sell data to interested IOCs. The TGS-Schlumberger duo would be free to trade the data with the IOCs over the next eight years.
As per terms of contract, the JV firm would have to share the seismic data and the profit with the host.
Bangladesh never conducted multi-client seismic survey in its offshore areas in the past. The country had earlier floated international tenders several times to carry out oil-and-gas exploration by the IOCs - both in onshore and offshore.
The bid-winning IOCs would carry out seismic surveys in their respective blocks on their own before initiating exploration.
Bangladesh’s offshore areas are now well-demarcated following the verdicts from international courts. Bangladesh has territorial rights of up to 200 nautical miles from the shore into the Bay of Bengal as exclusive economic zone.
Besides, the country has free access to around 387 nautical miles into the deep sea following the demarcation of maritime boundary by international court of arbitration.
There is great potential of getting hydrocarbons in Bangladesh’s territorial waters, as both India and Myanmar have already discovered huge gas reserves in the Bay.
“The IOCs are expected to show significant interest in exploration in the country’s offshore areas once the seismic data are available,” says energy-expert Prof M Tamim, who was special assistant to the chief adviser of former caretaker government on energy issues.
It should have been carried out earlier to ramp up local exploration and ensure increased output of local gas, which could reduce dependence on imported fuels, including expensive LNG, he viewed.
Petrobangla floated offshore bidding rounds without any survey in 2008, 2012 and 2016. But only a few IOCs took part in the biddings, while production-sharing contracts (PSCs) could be inked only for four blocks.
Currently, Bangladesh has 26 open offshore and 22 onshore blocks.
Out of the offshore blocks, 15 are located in deep waters and 11 in shallow waters. Bangladesh has PSCs for two shallow-water blocks-SS-04 and SS-09 — which are being explored jointly by India’s ONGC Videsh Ltd and Oil India Ltd.
Out of the total onshore blocks, only four are awarded to IOCs.
US’s Chevron has been exploring and producing natural gas in three onshore blocks - Block 12, Block 13 and Block 14 - while Singapore’s KrisEnergy is producing natural gas from Block-9.

Azizjst@yahoo.com