Bidding for offshore energy search shortly

Search for offshore hydrocarbons starts shortly as Bangladesh is all set to launch international bidding, after five years, now that fuel shortages haunt households and industries.
Export of surplus gas and global-level pricing are among sweeteners put in model deals for international oil majors, officials say.
Sources have said state-run Petrobangla is now doing the spadework to float tender inviting international oil companies (IOCs) early next month (March) to conduct energy exploration in unexplored blocks in the Bay of Bengal.
Energy and mineral resources division (EMRD) under the Ministry of Power, Energy and Mineral Resources (MPEMR) has already given the go-ahead to Petrobangla to launch the much-needed bidding round, a senior Petrobangla official told The Financial Express Tuesday.
The Bangladesh oil, gas and mineral corporation or Petrobangla will offer fresh terms and conditions and fiscal incentives under the already-approved 'Bangladesh Offshore Model Production Sharing Contract (PSC) 2023' to lure IOCs into the bidding round.
The cabinet committee on economic affairs approved the model PSC on July 26, 2023 with more sweeteners as the previous model PSC had failed to attract IOCs for exploration, said the official.
Under the new model contract, gas pricing has been tagged to the price of Brent Crude on the international market so that the gas price becomes flexible in line with movement of global oil prices.
"The gas price will be 10 per cent of Brent Crude, meaning if the Brent crude is traded at $80 per barrel, the gas price would be $9.0 per thousand cubic feet (MCF)," says the official about the pricing arithmetic of international standards.
Gas price will be same for both shallow and deepwater blocks under the 'Model PSC 2023'.
The corporation will purchase the explored IOC gas at the Brent crude-linked rate, which will have no capping, he added.
Capping-free price means Bangladesh will have to purchase the gas, to be extracted by the contractors, at a rate as high as it goes or as low as it slips, he explains the new arrangement.
The foreign companies to be engaged in future offshore exploration jobs will also have the liberty to export natural gas after meeting domestic demand under the model PSC.
The government share in 'profit gas' has been reduced to 40-70 per cent from the previous contact's 55-80 per cent in the model PSC to make the deals lucrative.
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.
Officials say the model PSC has coined increased benefit to attract the foreign explorers, at a time when the government has to augment import of liquefied natural gas (LNG) from global market to feed gas-guzzling industries and power plants.
The country will have to purchase natural gas from the future overseas exploration contractors at price around three times the current rate.
Currently, Petrobangla pays around US$2.75 per Mcf for locally produced gas to the IOCs, while considering the current Brent crude oil at US$82 per barrel, the state-run company will have to buy gas at US$8.20 per Mcf.
Currently, Bangladesh's LNG-import price under two long-term contracts with Qatargas and Oman Trading International hovers around $10.50 per Mcf.
Buoyed by the potential of enhanced tariff structure, the US-based oil super-major ExxonMobil and Chevron placed a proposal to explore all the 15 deep-sea blocks in the Bay of Bengal several months back.
Chevron Bangladesh was also in talk to get the exploration job through negotiation "bypassing competitive tendering", said sources.
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.
Over the last one decade Bangladesh had launched only one bidding round in 2019 and that too was for only three deepwater blocks, said sources.
Although Posco-Daewoo was awarded one deepwater block - DS-12 - after the bidding, the South Korean oil-and-gas-exploration company left the block in 2020 empting the block.
Previously Petrobangla floated bidding round in 2012, through which three shallow-water blocks and one deepwater 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.
The country is currently producing aroun2,695mmcfd gas including 654 mmcfd of re-gasified imported LNG, according to Petrobangla data as on February 12, 2024.

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