Aussie firm Santos seeks gas exploration right
Saturday, 30 October 2010
M Azizur Rahman
Australian oil company Santos has followed in Cairn's footsteps and sought exploration rights in the country's two gas blocks provided that it would also be allowed to sell gas to private buyers at market price, top officials said Friday.
Santos has teamed up with the US oil minnow Oakland International LDC to conduct exploration in blocks -17 and 18 spread over 18,367 square kilometres around Cox's Bazar and parts of the Bay of Bengal.
French oil giant Total along with partners, including a joint venture of Oakland and Rexwood, relinquished the block in March last year dubbing those 'commercially non-viable for explorations.'
Total was the operator of both the blocks. The joint venture of Oakland-Rexwood has later emerged as Oakland International LDC.
"Santos and Oakland have informed us about their interest to conduct oil and gas explorations in blocks -17 and 18," a senior energy ministry official told the FE Friday.
They sought to sell gas to third parties bypassing Petrobangla, said the official.
Experts said the government's approval last month to allow Scottish Cairn Energy to sell gas to private buyers by amending the production sharing contract (PSC) clause has prompted the Santos and its partners to table a similar proposal.
Following the approval, Cairn Energy has become the first and only international oil company operating in Bangladesh that can initiate negotiation with private buyers to sell gas.
All other foreign firms sell their gas output to state-owned Petrobangla first at PSC rates, which then sells it to state-owned gas distribution companies to reach end-users.
If Santos and its partners sell the gas to petrobangla, the price will be $2.9 per unit (1,000 cubic feet) at maximum.
The decision over this issue is expected to come from government high-ups after scrutiny of legal and economic aspects, said the energy ministry official.
A high powered team comprising Santos and Oakland top officials will be visiting the country and hold discussions with energy ministry and Petrobangla officials next week.
Total and its partners earlier invested around $30 million to conduct seismic and 3D surveys before declaring both these structures commercially non-viable in March 2009.
They had found gas reserves of around 275 Bcf at Teknaf structure near St Martin's Island in the Bay of Bengal, but felt that this reserve would not be economically viable and subsequently gave up their exploration rights to these blocks.
Santos and Oakland have approached the energy ministry recently intending to sign a PSC amendment agreement to this effect.
"We have demanded to sell gas to third parties to get higher returns as the costs of exploration in offshore gas fields have gone up," a company insider said.
Under the proposed venture, Santos will be the operator for blocks 17 and 18 having 88 per cent stake, while the remaining 12 per cent stake will be owned by Oakland and Rexwood, said a company insider.
State-owned Petrobangla had initially awarded both the blocks 17 and 18 to the Oakland-Rexwood joint venture during its first round of energy bidding in January 1997, but they did not carry out exploration due to poor gas demand in the country at that time.
Tullow later bought a majority stake from the JV, then sold 60 per cent stake to Total in 2006, which last year sold half of its stake to Thai PTTEP.
Total held a 30 per cent stake in blocks 17 and 18 along with Irish oil company Tullow (32 per cent), Thai energy giant PTTEP (30 per cent) and US companies Oakland and Rexwood (8 per cent) when they gave up the blocks.
Australian oil company Santos has followed in Cairn's footsteps and sought exploration rights in the country's two gas blocks provided that it would also be allowed to sell gas to private buyers at market price, top officials said Friday.
Santos has teamed up with the US oil minnow Oakland International LDC to conduct exploration in blocks -17 and 18 spread over 18,367 square kilometres around Cox's Bazar and parts of the Bay of Bengal.
French oil giant Total along with partners, including a joint venture of Oakland and Rexwood, relinquished the block in March last year dubbing those 'commercially non-viable for explorations.'
Total was the operator of both the blocks. The joint venture of Oakland-Rexwood has later emerged as Oakland International LDC.
"Santos and Oakland have informed us about their interest to conduct oil and gas explorations in blocks -17 and 18," a senior energy ministry official told the FE Friday.
They sought to sell gas to third parties bypassing Petrobangla, said the official.
Experts said the government's approval last month to allow Scottish Cairn Energy to sell gas to private buyers by amending the production sharing contract (PSC) clause has prompted the Santos and its partners to table a similar proposal.
Following the approval, Cairn Energy has become the first and only international oil company operating in Bangladesh that can initiate negotiation with private buyers to sell gas.
All other foreign firms sell their gas output to state-owned Petrobangla first at PSC rates, which then sells it to state-owned gas distribution companies to reach end-users.
If Santos and its partners sell the gas to petrobangla, the price will be $2.9 per unit (1,000 cubic feet) at maximum.
The decision over this issue is expected to come from government high-ups after scrutiny of legal and economic aspects, said the energy ministry official.
A high powered team comprising Santos and Oakland top officials will be visiting the country and hold discussions with energy ministry and Petrobangla officials next week.
Total and its partners earlier invested around $30 million to conduct seismic and 3D surveys before declaring both these structures commercially non-viable in March 2009.
They had found gas reserves of around 275 Bcf at Teknaf structure near St Martin's Island in the Bay of Bengal, but felt that this reserve would not be economically viable and subsequently gave up their exploration rights to these blocks.
Santos and Oakland have approached the energy ministry recently intending to sign a PSC amendment agreement to this effect.
"We have demanded to sell gas to third parties to get higher returns as the costs of exploration in offshore gas fields have gone up," a company insider said.
Under the proposed venture, Santos will be the operator for blocks 17 and 18 having 88 per cent stake, while the remaining 12 per cent stake will be owned by Oakland and Rexwood, said a company insider.
State-owned Petrobangla had initially awarded both the blocks 17 and 18 to the Oakland-Rexwood joint venture during its first round of energy bidding in January 1997, but they did not carry out exploration due to poor gas demand in the country at that time.
Tullow later bought a majority stake from the JV, then sold 60 per cent stake to Total in 2006, which last year sold half of its stake to Thai PTTEP.
Total held a 30 per cent stake in blocks 17 and 18 along with Irish oil company Tullow (32 per cent), Thai energy giant PTTEP (30 per cent) and US companies Oakland and Rexwood (8 per cent) when they gave up the blocks.