Offshore gas search uncertain, import dependence deepens

Launching long-awaited bidding for offshore hydrocarbon exploration seems uncertain before the next general election, slated for January 2024, sources said, while the country's fuel-import dependence increases.
After getting approval for its 'lucrative' new model production-sharing contract (PSC) for offshore blocks by the cabinet committee on economic affairs around a couple of months back, the state-run Petrobangla now keeps tightlipped on the planned launch of a fresh bidding round, they said.
The state corporation now waits for instructions from the energy and mineral resources division (EMRD) under the Ministry of Power, Energy and Mineral Resources (MPEMR), a senior official of the agency said.
Under the model PSC the offshore gas price for international oil companies (IOCs) will be fixed in line with international market, which will be benchmarked with Brent crude-oil prices.
A single unit's price of offshore gas will be equivalent to 10 per cent of three- month average of Brent crude price per barrel, meaning there will be no capping in offshore-gas pricing.
The previous 2019 model PSC had a cap set at maximum US $7.25 per Mcf (1,000 cubic feet) in offshore gas pricing, with a provision of a 1.5-percent annual hike.
The new model PSC would entitle Bangladesh to a maximum 65-percent profit, while the minimum profit can drop as low as to 35 per cent, said sources.
In the previous PSC model, the share of profit varied, depending on the amount of daily gas extraction. There were six steps of profit sharing, entitling Bangladesh up to 80 per cent of the profit. The lowest profit was 55 per cent.
Annual cost recovery has been increased to 75 per cent in the new PSC model from 70 per cent in the previous one.
The fresh model PSC model, however, retains provisions for gas export after meeting domestic demand and income-tax exemption for investors.
Under the new model PSC, Petrobangla may purchase hydrocarbons from exploration contractors at more than three times the current price of around US$2.75 per million British Thermal unit (MMBtu) as it is linking the price with same benchmark used to buy expensive liquefied natural gas (LNG) without capping, says another official concerned.
Under the proposed pricing formula, the corporation-offered buying price to IOCs will be around US$9.1 per MMBtu as per the current global Brent crude price at US$ 91 per barrel.
Petroangla is also yet to decide as to how many offshore blocks it will offer in the ensuing offshore-exploration bidding round.
The country recently completed multi-client survey in over one-third of Bangladesh's total sea area to delineate hydrocarbon reserves and outcome rollout is awaited while an acute primary-fuel crunch affects the economy.
"We have completed 2D (two-dimensional) seismic survey in around 13,000 line-kilometer (LKM) area of our sea territory," Petrobangla chairman Zanendra Nath Sarker said.
The contractor, Tomlinson Geophysical Services Inc (TGS)-Schlumberger, a Norway-US joint venture (JV), is contractually bound to carry out survey in 32,000-LKM area.
The JV firm will carry out seismic survey in the remaining 19,000-LKM area from February 2024, said Mr Sarker.
Experts of the JV firm are now assessing data of its surveyed area before rolling out the results.
"Through this survey the firm will be able to say primarily about presence of hydrocarbon deposit, if any, in the Bay," said the official.
Actual discovery could be ascertained only after carrying out 3D (three-dimensional) seismic survey and necessary drilling of wells in potential spots, he added.
Petrobangla would provide the survey output to interested IOCs with the non-exclusive multi-client seismic data of the offshore blocks to help them carry out basin evaluation, prospect generation, and participation in the upcoming bidding for exploration.
Bangladesh never conducted multi-client seismic survey on its waters in the past. The country had earlier floated international tenders several times for oil-and-gas exploration by the IOCs - both onshore and offshore.
The bid-winning IOCs would carry out seismic surveys in their respective blocks on their own before initiating exploration.
Bangladesh's offshore areas are now well-demarcated following the verdicts from international courts. Bangladesh has territorial rights of up to 200 nautical miles from the shore into the Bay of Bengal as exclusive economic zone.
Besides, the country has free access to around 387 nautical miles into the deep sea following the demarcation of maritime boundary by international court of arbitration.
Petrobangla had floated offshore bidding rounds without any survey in 2008, 2012 and 2016. But only a few IOCs took part in the biddings, while production-sharing contracts could be inked only for four blocks.
Currently, Bangladesh has 26 open offshore and 22 onshore blocks.
Out of the offshore blocks, 15 are located in deep waters and 11 in shallow waters. Bangladesh has PSCs for two shallow-water blocks-SS-04 and SS-09 -- which are being explored jointly by India's ONGC Videsh Ltd and Oil India Ltd.
Out of the total onshore blocks, only four are awarded to IOCs.
US's Chevron has been exploring and producing natural gas in three onshore blocks - Block 12, Block 13 and Block 14 - while Singapore's KrisEnergy is producing gas from Block-9.

Azizjst@yahoo.com