Govt to take 'carried interest' for Bapex in offshore gas blocks
Tuesday, 25 September 2012
M Azizur Rahman
The government has decided to take 10 per cent 'carried interest' for state-owned Bapex in all offshore gas blocks to be effective in the next bidding round without confirming the fund source to cover the costs, a top official has said.
State-owned Bangladesh Petroleum Exploration and Production Company Ltd (Bapex) would have to invest proportionately in any commercial hydrocarbon discoveries holding the 10 per cent 'carried interest', he said.
"We have decided to take 'carried interest' for Bapex to hold its stakes with the reputable international firms and gather knowledge and expertise for oil and gas exploration in the prospective zone of Bay of Bengal," Petrobangla chairman Hussain Monsur told the FE Monday.
He, however, could not say whether the fund to be invested in the 'carried interest' portion would come from government exchequer or Bapex itself.
Bapex, a subsidiary of state-owned Petrobangla, had never engaged in offshore oil and gas exploration, he said.
"We want to participate actively along with the reputable international firms in offshore oil and gas exploration activities," Bapex Managing Director (MD) Mortuza Ahmad Faruque said Monday. "It would help develop Bapex's working skills," he said. The government finalised this month the production sharing contract (PSC) for its planned October bidding round, allowing a 72.41 per cent higher domestic sales price for natural gas discovered in the offshore blocks it would offer.
Gas export, in any form, has been prohibited under the model PSC.
The October bidding round would offer 12 offshore gas blocks -- nine in shallow water and three in deep water -- in the Bay of Bengal.
This will be the country's fourth bidding round since 2008. The earlier ones were held in 2001 and 1997.
The bid documents are set to be available for sale on October 15-December 15, with the bidding's closing date in February 2013, said a Petrobangla official.
Bangladesh was mulling earlier to take a 20 per cent 'carried interest' in all offshore gas blocks to be offered in its next bidding round.
But it has reduced the proportion considering Bapex's financial capacity to maintain 20 per cent 'carried interest' stakes in any offshore blocks, given the high costs and high risks involved in offshore exploration.
Bangladesh did not take any 'carried interest' stakes in its last offshore bidding round in February 2008, which was marred by protests from neighbouring Myanmar and India over maritime boundary disputes.
Bapex did take 10 per cent 'carried interest' in bidding rounds in 1997 and 2001, resulting in its holding a 10 per cent 'carried interest' in four blocks-- 7, 9, 5 and 10 --with different international oil companies as partners under production sharing contracts.
Of the four, only onshore block 9, operated by UK-listed Tullow Oil, is operational, contributing around 100 million cubic feet per day (mmcfd) of gas to the national grid.
"We have so far invested around Tk 740 million from our own coffers to develop block 9 as part of our 10 per cent 'carried interest' stake," the Bapex MD said.
The US's Chevron has relinquished onshore block 7 early this year following poor outcome after drilling an exploratory well.
Cairn Energy and its Australian partner Santos relinquished blocks 5 and 10 after assessing them as being 'nearly barren' early 2009.
Bapex is also eying a joint venture with an international oil company to take part in the offshore bidding round.
It has also completed negotiation with China's Sinopec Shengli to develop four onshore fields in Bangladesh's Chittagong region under a 70:30 joint venture.
The four fields -- Kotia, Joldi, Kafalong and Shitapara -- are located in block 22, which spans 13,900 sq km of the restive Chittagong Hill Tracts region, where a festering insurgency has killed 2,500 since the 1980s.
It is also engaged in talks with China National Offshore Oil Corporation to form a JV to explore gas prospects in Bangladesh offshore area.
If negotiations are successful, it will be CNOOC's first investment in Bangladesh's oil and gas sector.
Bapex is currently involved in onshore gas fields in Bangladesh with an aggregated output of around 81 mmcfd, accounting for about 3.56 per cent of the country's overall gas output of 2,270 mmcfd as of September 23, 2012.
International companies operating in Bangladesh, Chevron, Australian Santos and Irish Tullow Oil, produce a total 1,270 mmcfd, accounting for nearly 56 per cent of the country's overall production.
State-run gas companies produce the rest output.
The country is struggling to meet domestic gas demand, which exceeds 2,700 mmcfd and is growing at an average 10 per cent per year.
The government has decided to take 10 per cent 'carried interest' for state-owned Bapex in all offshore gas blocks to be effective in the next bidding round without confirming the fund source to cover the costs, a top official has said.
State-owned Bangladesh Petroleum Exploration and Production Company Ltd (Bapex) would have to invest proportionately in any commercial hydrocarbon discoveries holding the 10 per cent 'carried interest', he said.
"We have decided to take 'carried interest' for Bapex to hold its stakes with the reputable international firms and gather knowledge and expertise for oil and gas exploration in the prospective zone of Bay of Bengal," Petrobangla chairman Hussain Monsur told the FE Monday.
He, however, could not say whether the fund to be invested in the 'carried interest' portion would come from government exchequer or Bapex itself.
Bapex, a subsidiary of state-owned Petrobangla, had never engaged in offshore oil and gas exploration, he said.
"We want to participate actively along with the reputable international firms in offshore oil and gas exploration activities," Bapex Managing Director (MD) Mortuza Ahmad Faruque said Monday. "It would help develop Bapex's working skills," he said. The government finalised this month the production sharing contract (PSC) for its planned October bidding round, allowing a 72.41 per cent higher domestic sales price for natural gas discovered in the offshore blocks it would offer.
Gas export, in any form, has been prohibited under the model PSC.
The October bidding round would offer 12 offshore gas blocks -- nine in shallow water and three in deep water -- in the Bay of Bengal.
This will be the country's fourth bidding round since 2008. The earlier ones were held in 2001 and 1997.
The bid documents are set to be available for sale on October 15-December 15, with the bidding's closing date in February 2013, said a Petrobangla official.
Bangladesh was mulling earlier to take a 20 per cent 'carried interest' in all offshore gas blocks to be offered in its next bidding round.
But it has reduced the proportion considering Bapex's financial capacity to maintain 20 per cent 'carried interest' stakes in any offshore blocks, given the high costs and high risks involved in offshore exploration.
Bangladesh did not take any 'carried interest' stakes in its last offshore bidding round in February 2008, which was marred by protests from neighbouring Myanmar and India over maritime boundary disputes.
Bapex did take 10 per cent 'carried interest' in bidding rounds in 1997 and 2001, resulting in its holding a 10 per cent 'carried interest' in four blocks-- 7, 9, 5 and 10 --with different international oil companies as partners under production sharing contracts.
Of the four, only onshore block 9, operated by UK-listed Tullow Oil, is operational, contributing around 100 million cubic feet per day (mmcfd) of gas to the national grid.
"We have so far invested around Tk 740 million from our own coffers to develop block 9 as part of our 10 per cent 'carried interest' stake," the Bapex MD said.
The US's Chevron has relinquished onshore block 7 early this year following poor outcome after drilling an exploratory well.
Cairn Energy and its Australian partner Santos relinquished blocks 5 and 10 after assessing them as being 'nearly barren' early 2009.
Bapex is also eying a joint venture with an international oil company to take part in the offshore bidding round.
It has also completed negotiation with China's Sinopec Shengli to develop four onshore fields in Bangladesh's Chittagong region under a 70:30 joint venture.
The four fields -- Kotia, Joldi, Kafalong and Shitapara -- are located in block 22, which spans 13,900 sq km of the restive Chittagong Hill Tracts region, where a festering insurgency has killed 2,500 since the 1980s.
It is also engaged in talks with China National Offshore Oil Corporation to form a JV to explore gas prospects in Bangladesh offshore area.
If negotiations are successful, it will be CNOOC's first investment in Bangladesh's oil and gas sector.
Bapex is currently involved in onshore gas fields in Bangladesh with an aggregated output of around 81 mmcfd, accounting for about 3.56 per cent of the country's overall gas output of 2,270 mmcfd as of September 23, 2012.
International companies operating in Bangladesh, Chevron, Australian Santos and Irish Tullow Oil, produce a total 1,270 mmcfd, accounting for nearly 56 per cent of the country's overall production.
State-run gas companies produce the rest output.
The country is struggling to meet domestic gas demand, which exceeds 2,700 mmcfd and is growing at an average 10 per cent per year.