ConocoPhillips to continue exploration in other blocks

The refusal of ConocoPhillips to sign production-sharing contract (PSC) for shallow water block SS-07 in the Bay of Bengal will not affect the US-based company's exploration activities in other blocks, a company insider said.
"The decision on block SS-07 does not impact ConocoPhillips' commitment to exploration activities in Bangladesh," said the official.
The company said, after further evaluation it found that block SS-07 located offshore Bangladesh in the Bay of Bengal was no longer competitive in the company's portfolio and hence it notified the Petrobangla that it couldn't sign the PSC under the current terms.
"We will continue to be engaged with the Bangladesh government to explain the constraints associated with the PSC," the official said.
The US firm last week refused to ink any PSC with Bangladesh for oil and gas exploration in the shallow-water block SS-07 saying that the current fiscal terms for the block are not favourable to it.
It also argued that the block lay in deep water in the Bay of Bengal, not in shallow water, Petrobangla Chairman Hussain Monsur said.
Currently, ConocoPhillips is engaged in exploration activities in two deep water blocks --DS-08-10 and DS-08-11, which were awarded to the US firm on June 16, 2012 under the PSC terms of 2008 bidding round.
Separately, ConocoPhillips along with its Norwegian energy firm Statoil submitted bid in January, 2014, under a joint venture (JV) for hydrocarbon exploration in all the three deep water blocks put on offer.
The JV has committed to invest a total of US$327 million to explore three deep water blocks --DS-12; DS-16 and DS-21 during the periods for exploration. This will be a total of eight years with a five-year initial exploration period and a three-year subsequent exploration period.
It has proposed to provide bank guarantee of the same amount against its committed investments and work programmes.
In its proposal, the JV of the US and Norwegian firms also pledged to carry out a 3,412 line-kilometre two dimensional seismic survey in block DS-12, 2,775 line-kilometre survey in DS-16 and 3,376 line-kilometre survey in block DS-21.
Under the PSC terms of these deep water blocks that range from 200-2000 metres, the prices of wellhead oil and gas would increase by at least 2.0 per cent annually with the start of commercial production.
Wellhead gas prices in Bangladesh are pegged to high sulfur fuel oil prices in the international market, while oil prices are determined on a 'fair market value' basis as agreed by both contractors and state-owned Petrobangla.
Gas price, under the new model production sharing contract (MPSC), has been pegged to high sulfur fuel oil (HSFO) prices, or HSFO, and the floor price for HSFO has been fixed at US$ 100 per tonne and the ceiling price at $200 per tonne.
The gas price for these three deepwater blocks will be 130 per cent of HSFO price 'ex Singapore' with biddable discounts.
It works out the price at around $6.5 per Mcf (1.000 cubic feet).
The JV, if selected, would be exempted from paying a wheeling charge to the Petrobangla to transport natural gas to end-users within the country, he said.
Currently, the wheeling charge is 4 per cent, which is applicable to the operating IOCs.
It would also enjoy full repatriation of profit and exemption of signature bonus or royalty, duty for equipment and machinery imported for petroleum operations during exploration, production and development.
It would also have option to sell 50 per cent of the contractor's share of natural gas in the domestic market to a third party, at a negotiated price, without the Petrobangla's right of first refusal.
The contractor will, however, not be able to export gas, in any form, from these three deepwater blocks.
The contractor will be allowed to operate and sell oil and gas for 20 years from an oil field and 25 years from a gas field.