ConocoPhillips stops two offshore blocks\\\' operations

US oil and gas giant ConocoPhillips has terminated operations in two deep-water blocks - DS-08-10 and DS-08-11 - in the Bay of Bengal, as its bid to revise upward the fiscal terms under the production sharing contract (PSC) was denied, a senior Petrobangla official said Monday.
"Based on the results of the geological and geophysical work as well as our inability to migrate to the new deep-water PSC terms, needed for a commercial development, we are unable to justify drilling an identified prospect," ConocoPhillips Bangladesh managing director Tom Earley told the FE Monday.
"We have therefore decided not to continue petroleum operations [in these two blocks], and the PSC will be terminated on 15 December 2014," he said.
Earley also stated, "We wish to emphasize that our decision on blocks 10 & 11 is based on technical and commercial merits of the blocks and PSC terms only."
The US firm has informed Petrobangla of its decision, said a senior official.
This is the second incident that the US firm has pulled itself out from the country's offshore operations due to non-viable prospects.
In April ConocoPhillips backed out from signing a PSC for oil and gas exploration in shallow water block SS-07 despite being selected finally by the government.
The company then stated that it found block SS-07, located offshore Bangladesh, was no longer competitive in the company's portfolio, and hence notified Petrobangla that it cannot sign the PSC under the current terms.
In June ConocoPhillips sought upward revision of fiscal terms in the PSC for these two deep water blocks.
The firm then held talks with State Minister for Ministry of Power, Energy and Mineral Resources Nasrul Hamid, expressing its plea.
"The government was not in a position to change the PSC terms for these deep-water blocks," Hamid told Platts Monday in an immediate reaction to ConocoPhillip's decision.
ConocoPhillips was seeking 2.0 per cent hike in natural gas tariff annually, and raise the tariff to a level similar to that of neighbouring Myanmar, he said.
The company also wanted that like Myanmar, Bangladesh would build a sub-sea natural gas pipeline to supply natural gas, to be produced in the two deep water blocks, from deep sea to shore.
"But we were legally bound. If we increased the tariff, other international oil companies, operating in the country, could have come and follow the suit."
"The US firm's decision is certainly a setback for the country, as our carrying out explorations in these blocks has been delayed," he added.
However, energy expert Professor M Tamim has appreciated the government's decision of not revising upward the tariff structure by amending the PSC.
"The government has taken a good decision by not allowing higher tariff to ConocoPhillips."
He said the government will be able to use the 2D seismic data of the survey, carried out by ConocoPhillips, under the PSC terms, for future exploration.
A senior Petrobangla official said ConocoPhillips was eyeing for similar fiscal terms of the revised model PSC for deep water blocks under 2012 bidding round.
The US firm was also interested to get the country's lone state-owned exploration company - Bangladesh Petroleum Exploration and Production Company Ltd (Bapex) - as partner for these two deepwater blocks, he said.  
ConocoPhillips signed the PSC for the two deep-water blocks on June 16, 2011 after being awarded these under 2008 bidding round. The PSC with the US firm was Bangladesh's first deep water exploration contract.
There was no provision of annual hike of hydrocarbon prices as well as exemption from paying a wheeling charge to Petrobangla to transport natural gas to end-users.

azizjst@yahoo.com