Santos may be allowed to sell gas to pvt buyers
Sunday, 15 May 2011
M Azizur Rahman
The government is set to ink an amendment to the existing gas purchase and sales agreement (GPSA) with Australian oil and gas company Santos this week allowing the firm to sell gas from its offshore structures to private buyers, said a top government official. He said Prime Minister Sheikh Hasina, who is also the minister for power and energy, has already approved a Santos plea to amend the GPSA with state-owned Petrobangla. Under the existing GPSA, Santos can sell its gas only to Petrobangla at a maximum price of US$ 2.90 per unit (1,000 cubic feet). But Santos believes it can get higher prices if it is allowed to sell gas to private buyers. The Australian firm has already offered private buyers of Chittagong a 55 per cent higher price at $ 4.50 per unit for gas from its new offshore structures in the Bay of Bengal. "The price we have offered is a baseline one," Santos Bangladesh Ltd Senior Vice-President Ajay Nambiar told the FE Friday. He said selling gas at a lower price than $ 4.50 per unit from new offshore structures would not be commercially viable. Santos sought the GPSA amendment saying it needed a government decision on the matter before it could begin exploration in the offshore gas fields. The firm has planned to begin drilling exploration wells in three offshore structures - Sangu 11, South Sangu and Magnama - in block 16 by October. Petrobangla has already approved Santos' $ 105 million investment plan for drilling in the three prospective locations stretching over 8,621 sq km in the Bay of Bengal. The firm Santos has almost completed all necessary deals with rig, helicopter and ship providers, which will enable drilling to commence on schedule, said a senior Petrobangla official. Once the GPSA amendment is inked, Santos will become the first foreign company operating in the country to sell gas directly to the private sector, bypassing Petrobangla. But Petrobangla will get the first right of refusal for gas from Santos at market prices under the amendment. Currently, all foreign companies operating in the country sell their gas output to Petrobangla, which then sells the same to state-owned gas distribution companies to reach end-users. Santos along with its previous partner Cairn Energy had spotted three gas prospects, Sangu 11, South Sangu and Magnama in block 16 after 3-D seismic surveys, and decided to complete drilling in these three wells by April, 2012. UK-based explorer Cairn Energy, the former operator of block 16, had already obtained the government's approval to sell gas from the block at market prices to private buyers in the country under the production sharing contract (PSC). But an amendment to the GPSA was necessary for this to be effective. Santos acquired Cairn Energy's interests in Bangladesh in November last year to become the operator of the country's only offshore operating gas field Sangu along with other assets and liabilities. Gas production from Sangu is now hovering around 17 million cubic feet per day (mmcfd) as a consequence of the persistent fall in gas production from as high as 200 mmcfd several years ago.
The government is set to ink an amendment to the existing gas purchase and sales agreement (GPSA) with Australian oil and gas company Santos this week allowing the firm to sell gas from its offshore structures to private buyers, said a top government official. He said Prime Minister Sheikh Hasina, who is also the minister for power and energy, has already approved a Santos plea to amend the GPSA with state-owned Petrobangla. Under the existing GPSA, Santos can sell its gas only to Petrobangla at a maximum price of US$ 2.90 per unit (1,000 cubic feet). But Santos believes it can get higher prices if it is allowed to sell gas to private buyers. The Australian firm has already offered private buyers of Chittagong a 55 per cent higher price at $ 4.50 per unit for gas from its new offshore structures in the Bay of Bengal. "The price we have offered is a baseline one," Santos Bangladesh Ltd Senior Vice-President Ajay Nambiar told the FE Friday. He said selling gas at a lower price than $ 4.50 per unit from new offshore structures would not be commercially viable. Santos sought the GPSA amendment saying it needed a government decision on the matter before it could begin exploration in the offshore gas fields. The firm has planned to begin drilling exploration wells in three offshore structures - Sangu 11, South Sangu and Magnama - in block 16 by October. Petrobangla has already approved Santos' $ 105 million investment plan for drilling in the three prospective locations stretching over 8,621 sq km in the Bay of Bengal. The firm Santos has almost completed all necessary deals with rig, helicopter and ship providers, which will enable drilling to commence on schedule, said a senior Petrobangla official. Once the GPSA amendment is inked, Santos will become the first foreign company operating in the country to sell gas directly to the private sector, bypassing Petrobangla. But Petrobangla will get the first right of refusal for gas from Santos at market prices under the amendment. Currently, all foreign companies operating in the country sell their gas output to Petrobangla, which then sells the same to state-owned gas distribution companies to reach end-users. Santos along with its previous partner Cairn Energy had spotted three gas prospects, Sangu 11, South Sangu and Magnama in block 16 after 3-D seismic surveys, and decided to complete drilling in these three wells by April, 2012. UK-based explorer Cairn Energy, the former operator of block 16, had already obtained the government's approval to sell gas from the block at market prices to private buyers in the country under the production sharing contract (PSC). But an amendment to the GPSA was necessary for this to be effective. Santos acquired Cairn Energy's interests in Bangladesh in November last year to become the operator of the country's only offshore operating gas field Sangu along with other assets and liabilities. Gas production from Sangu is now hovering around 17 million cubic feet per day (mmcfd) as a consequence of the persistent fall in gas production from as high as 200 mmcfd several years ago.