OVL to start exploration drilling in offshore block SS-09 in April

ONGC Videsh Ltd (OVL) would carry out exploration in an offshore block (SS-09) by April this year, after being encouraged by the findings of 2D seismic surveys conducted earlier, said a senior official at state-run Petrobangla.
One well will be drilled near Moheshkhali, he said, based on the results of the two-dimensional (2D) seismic surveys, conducted by the Indian firm in two shallow water blocks, including SS-04, in 2016.
If there is any discovery of hydrocarbon, it will be a big boost to the energy sector of Bangladesh, which has long been suffering from acute shortage of energy, he added.
Officials say the existing gas reserve will start depleting fast after 2018 and exhaust by around 2030 if there is no new substantial discovery.
Presently, the daily average output of natural gas, the main energy source of the country, will be around 2,700 million cubic feet per day (mmcfd) against a demand for over 3,300 mmcfd.
The entire gas production comes from the country's onshore gas fields alone as there is no production well offshore Bangladesh currently.
Bangladesh started facing natural gas crisis from 2009 with the rapid industrialisation, forcing the Petrobangla to ration supplies to gas-guzzling industries, power plants, compressed natural gas (CNG) filling stations and households.
Any fresh discovery of hydrocarbon will boost the economy significantly, said a senior Petrobangla official.
The government inked the Production Sharing Contracts (PSCs) for the blocks SS-04 and SS-09 with a consortium OVL and Oil India Limited (OIL) on February 17, 2014.
The OVL is the operator of these blocks having participating interest of 45 per cent and OIL 45 per cent while Bangladesh Petroleum Exploration and Production Company Limited (BAPEX) holding a stake of 10 per cent carried over interest.
The block SS-04 covers an area of 7,269 square kilometres (sq km) and block SS-09 covers an area of 7,026 sq km. Water depths of both the blocks ranges from 20-200 metres.
The exploration term for both the blocks consists of eight consecutive contract years comprising five years as initial exploration period and three years as subsequent exploration period.
As per the PSC, the OVL was supposed to conduct 2,700 full-fold LKM (line-kilometre) 2D seismic data acquisition and processing, and one exploratory well in block SS-04, while 2,700 LKM 2D seismic data acquisition and processing, and two exploratory wells in block SS-09.
It is committed to spend around US$58.4 million for block SS-04 and $86.4 million for block SS-09.
The contractors will be allowed to operate and sell oil and gas for 20 years from an oil field and 25 years from a gas field.
Wellhead gas prices in Bangladesh are pegged to high sulphur fuel oil (HSFO) prices in the international market, while oil prices are determined on a 'fair market value' basis as agreed by both contractors and state-owned Petrobangla.
The floor price for HSFO has been fixed at $100 per tonne and the ceiling price at $200 per tonne to fix gas price.
The latter works out to around $5.50 per Mcf (1,000 cubic feet) before a 37.5 per cent corporate tax that has to be paid by the contractor.
Other features of the PSC are: the licence holder will have right to full repatriation of profits; will not be charged any signature bonus or royalty; would not need to pay duty for equipment and machinery imported for operations during the exploration, development and production phases; will have 100 per cent cost recovery; and production bonuses.
The contractor can also sell gas to third parties after Petrobangla's first right of refusal.

[email protected]