Exploring hydrocarbon in the Bay

After a two-year pause, the government is expected to formulate a fresh production sharing contract (PSC) model to award offshore hydrocarbon blocks in the Bay of Bengal to the international oil companies (IOCs). Earlier, tenders for four rounds of PSC were floated in 1974, 1993, 2008 and 2012. Bangladesh has now a total of 23 hydrocarbon blocks in the Bay of Bengal.
According to reports, the IOCs will be interested if Bangladesh can complete a 2D seismic survey before inviting tenders for the new blocks. There are a number of companies which are eager to carry out the surveys and sell the data directly to the international oil firms. The government will not need to spend extra money for the survey because the work will be done under the PSC.
It may be mentioned here that the Permanent Court of Arbitration at Hague, Netherlands recently awarded Bangladesh 19,467 square kilometres, out of the total 25,602 square kilometres disputed with India, in the Bay of Bengal. Bangladesh won another case against Myanmar in 2012, following which it received over 111,000 square kilometres of area, including the disputed 25,000 square-kilometres.
In September 2012, the state-run Petrobangla floated tenders for 12 shallow and deep sea blocks -- excluding the then disputed maritime area with India -- in the Bay to explore oil and gas. Despite inviting tender bids twice for shallow blocks SS-02 to SS-4, and SS-06 to SS-11, only three companies responded. In 2011, a PSC was signed between ConocoPhillips and Petrobangla to explore two offshore blocks. That was the country's first-ever deep-water hydrocarbon hunt.
In February and March this year, Petrobangla signed deals with India's Oil and Natural Gas Corporation Limited (ONGC) and the Australia-Singapore joint venture, Santos-Kris Energy, to explore hydrocarbon in the three blocks.
However, the bidding process was halted for deep-sea blocks DS-12, DS-16 and DS-21 in February last year, as no multinational company had responded. The PSC was later revised to relax rules in compliance with the contractors' demands.
Last week, Prime Minister Sheikh Hasina directed the authorities concerned to float fresh tenders for hydrocarbon hunt in the Bay. Presiding over a meeting, the Prime Minister stated that no company should get more than one block in the Bay of Bengal to explore oil and gas. Various ways and means to harness the mineral resources in the Bay and using them for the people of Bangladesh were discussed in the meeting.
In fact, the government is trying to give emphasis on oil and gas exploration but there have been no significant discoveries while the existing reserve is being rapidly exhausted. The Petrobangla is prioritising oil and gas exploration in the Bay of Bengal and reassessing old fields if more gas could be extracted. The country has an estimated 16.36 trillion cubic feet (tcf) of recoverable gas reserves in its 23 discovered gas fields as of June 2012. Under the current consumption rate of around 2.26 billion cubic feet (bcf) per day the reserve gas can be used for the next 19 years, Petrobangla data revealed.
In fact, FDI (foreign direct investment) in the energy sector is failing to ensure the anticipated technology transfer in the fields of energy exploration and power generation over the past. Global oil companies often push the country to change the laws that become discriminatory to local companies. Besides the disadvantages faced by local companies due to tax-breaks offered to foreign companies in the energy sector, the thresholds fixed by the government for a project are also unreachable for the local companies.
With fast depletion of gas reserves, Bangladesh is likely to face acute energy crisis after 2016 if no new reserve is discovered. The situation has gone to such an extent that all concerned seem to have accepted the likely devastating effect of the gas supply crunch on the country's economy as a fait accompli. In fact, gas crisis is creating a 'snow-ball' effect on the country's economy, as hundreds of factories are yet to start operation and many power plants remain idle, hindering industrial growth.
Wastage is also eating up significant quantities of natural gas in Bangladesh. The inefficient use of natural gas is rampant in almost every gas-guzzling sector including power plants, fertiliser factories, industries, households and CNG filling stations, according to a recent World Bank-funded study on Bangladesh's energy efficiency.
The recent discovery of huge gas reserves by India and Myanmar in the Bay near Bangladesh's economic zone has encouraged a number of international energy companies to come up with proposals to initiate hydrocarbon explorations in offshore areas.
As it is evident, quite a good number of IOCs were engaged in exploring hydrocarbon resources in the country in the past. Many facilities were given to them without considering practical situation. Still, they are reportedly looking for more incentives and facilities.            
The situation demands extensive exploration on both onshore and offshore blocks in the wake of increasing gas crunch, caused mainly by lack of drilling in prospective fields. Harnessing hydrocarbon, along with, power, is of crucial importance.
A radical change is, indeed, needed in the energy sector. Otherwise, energy security will be difficult to be ensured. The sector also needs to be free from corruption. The country has already lost a lot due to widespread malpractice in the sector.
szkhan@dhaka.net