Bid winners to start exploring offshore gas blocks by Jan '14

FE Report Aspirant international oil companies (IOCs) Thursday enquired about the natural gas price and disputes with neighbouring countries. They made the queries as they are preparing to submit bids under the currently opened offshore bidding round, a senior Petrobangla official said. Petrobangla wants to award offshore gas blocks to winning bidders by June so that they could start exploration works by January 2014 The IOCs were enquiring whether natural gas price, as indicated in the model production sharing contract (MPSC), would be changed, he said. They also wanted to know whether the blocks, as offered in the bidding round, are absolutely free from any disputes with neighbouring countries, said the official. "Petrobangla has informed the IOCs that the natural gas price as indicated in the MPSC will not be changed," he said. Besides, all the offshore gas blocks that have been put on offer are absolutely dispute-free, the Petrobangla official said. US-based Chevron, ConocoPhillips and Anadarko Petroleum, Anglo-Dutch Shell Oil, Australian Santos, Statoil of Norway, Kris Energy of Singapore, Oil and Natural Gas Corporation (ONGC) of India, ENI of Italy and China National Offshore Oil Corporation (CNOOC) are among the IOCs that took part in the pre-bid meeting. Petrobangla launched the new offshore bidding round titled 'Bangladesh Offshore Bidding Round 2012' for hydrocarbon exploration by the IOCs in the Bay of Bengal. The Corporation offered 12 'dispute-free' oil and gas blocks on December 9, 2012. As per the MPSC for the bidding round, gas price has been pegged to high sulfur fuel oil prices (HSFO), and the floor price for HSFO has been fixed at US$ 100 per tonne and the ceiling price at $200 per tonne. It works out the price at around $5 per unit (1,000 cubic feet) without the corporate tax to be paid by the contractors. In the 2008 bidding round, the floor price for HSFO in the formula was fixed at $70/mt and the ceiling price at $180/mt. The price under the 2008 bidding round stood at $4.5 per unit. The prospective bidder, whether individual or under joint venture, will be able to bid for one or more blocks in the bidding round. But the individual or at least one member of the joint venture must have offshore daily production of at least 15,000 barrels of oil or 150 million cubic feet per day (mmcfd) of gas as operator to qualify for the bidding. Petrobangla started selling the bidding documents, including Model Production Sharing Contract (MPSC), information package, promotional package and data package from December 17 last year. The deadline for receiving bids from IOCs is March 18, 2013. Petrobangla is eyeing to award the offshore blocks within June or mid-July this year. The shallow-water gas blocks put on offer are SS-02; SS-03; SS-04; SS-06; SS-07; SS-08; SS-09; SS-10 and SS-11. Three deep-water gas blocks offered are DS-12; DS-16 and DS-21. The area of shallow-water gas blocks ranges from 4,463 sq kms to 7,692 sq kms, while the deep-sea blocks range from 3,190 sq kms to 3,516 sq kms. Water depth of shallow-water gas blocks ranges from three metres to 200 metres, while that of deep water ranges from 200-2,000 metres. The blocks have been put on offer in line with the verdict from the International Tribunal for the Law of the Sea (ITLOS) that settled the maritime boundary dispute with neighbouring Myanmar. None of the blocks disputed with neighbouring India will be offered in the bidding round. Petrobangla has also offered two lately discovered shallow-water fields -- Kutubdia and Teknaf -- under a 'special package' for exploration in this bidding round. Kutubdia has been tagged with SS-04 and Teknaf with SS-10 and the IOCs that will be awarded licence will have to explore the fields. As part of the special package for the fields, licence holders will have to give state-owned Petrobangla an additional 5.0 per cent of 'profit-gas' to be produced, on top of Petrobangla's regular profit-sharing structure. UNB quoted sources as saying, some of the IOCs wanted to know whether there is any possibility of extension of bid submission deadline. Petrobangla officials said they have no such plan yet. Some of the IOCs expressed a little bit of dissatisfaction about the price of the deep sea water gas. The new bidding prohibits export of gas or oil in any form. Rather, if IOC discovers any oil and gas, it has to build transportation infrastructure as well to reach gas or oil to the country's certain point as part of its development programme. There has been a provision in the new Model PSC to ensure 10 percent carried over interest in any block for government. This means, when a gas or oil field will be discovered, the government will get 10 percent share by its investment from that field. But in case of no discovery, the government does not need to bear any cost for this 10 percent stake. As some of the IOCs wanted to know how the government would deal with the 10 per cent carried over interest in a gas block, Petrobangla said it would take up the 10 percent interest as per PSC rule.