Govt signs PSC with Santos, KrisEnergy tomorrow

The government will award shallow water block SS-11 to Australian Santos and Singapore's KrisEnergy under joint venture (JV) tomorrow (Wednesday) for oil and gas exploration in the Bay of Bengal, a top official said Monday.
A production sharing contract (PSC) would be signed with the JV companies at Petrocentre in the city, Petrobangla Chairman Hussain Monsur told the FE.
The bid of the Santos-Kris JV was the only bid that Petrobangla received in its second attempt to attract international oil companies (IOCs) for hydrocarbon exploration in shallow water in the Bay of Bengal.
It had submitted bid, on close of bid submission deadline on July 29 last, for block SS-11 out of the total six shallow sea blocks as offered.
This PSC follows awarding of two shallow water blocks -- SS-04 and SS-09 -- to a JV comprising India's ONGC Videsh Limited (OVL) and Oil India Limited (OIL) on February 17 last.
Apart from Santos-Kris and OVL-OIL, ConocoPhillips was the only other company that submitted a bid for one of the nine shallow water blocks offered by Bangladesh in the December 2012.
ConocoPhillips was awarded the SS-07 block and a final PSC is expected to be signed with the oil major after fixing a date soon, Mr Monsur said.
Petrobangla's subsidiary, Bangladesh Petroleum Exploration and Production Company Ltd (Bapex), will have 10 per cent carried interest in all the four blocks.
The block SS-11 is located at southeast offshore from Bangladesh and close to Myanmar's sea territory.
The JV of Santos and Kris has committed to drill an exploration well, conduct 1,876 line kilometer 2D seismic survey, 300 sq km 3D survey and offered a bank guarantee of US$15 million, for the initial five years of exploration.
The JV bidder would require investing around US$ 30-32 million to carry out its work plan during the initial five year. The contract period for exploration will be eight years.
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.
The price of gas in Bangladesh is pegged to that of high sulfur fuel oil in the international market, while oil prices are determined as a fair market value agreed upon by the companies and Petrobangla.
The PSCs also allow the licence holders the right to full repatriation of profits, not pay any signature bonus or royalty on equipment and machinery imported for exploration, development and production. Companies will also have 100 per cent cost recovery.
Contractor can also sell gas directly to third parties, subject to Petrobangla's right of first refusal. But hydrocarbons produced from the shallow water blocks must be sold in the domestic market as exports are prohibited under the PSCs.
Currently, Bangladesh is dependent on onshore fields for natural gas output, with current production coming in at about 2,310 mmilion cubic feet per day (mmcfd) against demand of more than 2,700 mmcfd.
Australian oil and gas exploration Santos was the lone operator of Bangladesh's only operational offshore Sangu-11 well in the Bay of Bengal, which was shut permanently on October 1, 2013.
While in April 2013, KrisEnergy inked a sale and purchase agreement with UK's Tullow Oil to purchase its Bangladesh stakes at US$ 42.35 million with effect from January 1, 2013.
Kris has already taken over Tullow's asset in Bangladesh, said a Petrobangla official.
Following the purchase, KrisEnergy now has a 30 per cent interest in Block 9 on behalf of partners Niko Resources (60 per cent) and Bapex (10 per cent).
The block includes the Bangora gas producing facility and the Lalmai discovery.
During 2012, production from the Bangora field averaged around 100 mmcfd and 300 barrels of condensate per day, Tullow stated earlier.
Bangora gas field is currently producing around 111 mmcfd, according to Petrobangla data.