Govt sweetening terms to lure IOCs after 2024 flop

The government has moved to launch an offshore bid round again soon, sweetening further the terms to lure international oil companies (IOCs) following last year's failure.
State-run Petrobangla is working on finalising the draft of the model production sharing contract (MPSC), incorporating some attractive offers with last year's PSC terms, its Director for PSC Md Soyeb told The Financial Express Sunday.
In the forthcoming round, the government may shoulder the responsibility to pay corporate tax, and gas tariffs might be increased further, he said.
He hoped the draft would be finalised soon and sent to the Energy and Mineral Resources Division under the Ministry of Power, Energy and Mineral Resources for final approval.
The new round for offshore oil and gas exploration would be launched immediately after obtaining the energy ministry's nod, he said.
Officials said not a single IOC took part in last year's bidding, although half a dozen purchased documents.
The lack of confidence among IOCs, coupled with inadequate data on offshore blocks, resulted in the non-response, market insiders said.
Petrobangla had put the offer on board for nine months after floating the international tender on March 10, 2024.
Twenty-four offshore blocks - 15 in deep sea and nine in shallow - were on offer for exploration lease.
The 15 deep-sea blocks were DS-08, DS-09, DS-10, DS-11, DS-12, DS-13, DS-14, DS-15, DS-16, DS-17, DS-18, DS-19, DS-20, DS-21, and DS-22.
The nine shallow-water blocks were SS-01, SS-02, SS-03, SS-05, SS-06, SS-07, SS-08, SS-10, and SS-11.
The gas prices for the offered blocks were tagged with those of Brent crude on the international market during last year's bid.
It was done so that gas prices became flexible in line with the movement of global oil-price indices.
The gas price was offered at 10 per cent of Brent crude.
This meant if Brent crude was traded at $70 per barrel, the gas price would be $7.0 per million British thermal unit (MMBtu).
The pricing modalities were set the same for both shallow- and deep-water blocks.
As per the modalities, Petrobangla would have to purchase the explored IOC gas at the Brent crude-linked rate, which would have no capping.
Capping-free prices meant Bangladesh would have to purchase the gas at a rate as high as it went up or as low as it slipped.
The foreign firms also had the liberty to export natural gas after meeting the domestic demand following Petrobangla's first right of refusal.
They were offered the facility to repatriate full profits, too.
There was the provision for the assignment of interest, share transfer, and 100 per cent cost recovery with an annual cap of 75 per cent. It was mandatory for contractors to have a work programme consisting of a 2D seismic survey and purchase the available 2D multi-client seismic data to get relief from mandatory work obligations proportionately.
Over the last decade, Bangladesh launched only one bidding round in 2017, and that was only for three deep-water blocks, according to Petrobangla.
Although Posco-Daewoo was awarded one deep-water block - DS-12 - after the bidding, the South Korean oil and gas exploration company left the block in 2020 after carrying out a 2D seismic survey.
Previously, Petrobangla had floated a bidding round in 2012, through which three shallow-water blocks and a deep-water one were awarded to contractors.
Currently, four IOCs have active PSCs, either individually or under joint venture, to explore three shallow-water blocks in Bangladesh.
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 the Bangura field under block 9.
ONGC Videsh and Oil India are jointly exploring shallow-water blocks SS-04 and SS-09.

Azizjst@yahoo.com