Santos seeks amendment to gas sale agreement
Thursday, 24 March 2011
M Azizur Rahman
Country's much-needed gas exploration worth US$105 million in offshore gas fields appears uncertain in the coming winter too as the operator, Australian Santos, has sought amendment to existing gas sales deal first, officials said Wednesday. Santos' predecessor, the UK's Cairn Energy, similarly avoided conducting exploration in offshore gas fields last winter due to government's delay in amending a production-sharing contract (PSC). "We need a government decision by March 31 next so that we can complete necessary deals with rig, helicopter and ship providers by April and initiate drilling from October 2011," a company insider said. Otherwise, the company will not be able to conduct drilling of exploration wells under block 16 in the Bay of Bengal in next winter spanning from October 2011 to April 2012, he said. "The energy ministry will decide over Santos's plea," Petrobangla Director on PSC Muhammad Imaduddin told the FE. Officials said drilling in offshore gas structures by Santos is necessary to ensure that gas-guzzling industries and power plants do not face forced closure due to gas supply shortfall. Santos believes that a necessary amend ment to its existing gas purchase and sales agreement (GPSA) with state-owned Petrobangla will pave the way for the company to sell gas output at higher rates to private users avoiding Petrobangla. Before Santos's acquisition of the UK's Cairn Energy in Bangladesh in November 2010, Cairn had obtained the government's approval of right to sell gas from its new structures to private buyers. Cairn, the previous operator of block 16, had also signed an amendment to the production sharing contract (PSC) under which the operator would be able to negotiate with buyers besides Petrobangla for sale of gas. Following the PSC amenedment Santos became the first foreign company operating in Bangladesh to sell gas directly to private sector. But for effectiveness of the PSC, amendment to the existing GPSA is required, said the company insider. Under the existing GPSA, Santos can sell gas to Petrobangla at a maximum price of U$2.90 per unit (1000 cubic feet). Petrobangla in December last year approved Santos's US$105 million investment plan for drilling in three prospective locations stretching over 8,621 sq km in the Bay of Bengal. Santos along with its previous partner Cairn had spotted three prospective drilling locations - Sangu 11, South Sangu and Magnama - after conducting comprehensive 3D (3-dimension) surveys. They shared the 3D outcome with Petrobangla recently, but said actual gas reserves in these locations could be determined after drilling. Santos and its partners had detected gas presence in offshore gas structures following 2D seismic surveys in 2008. Australian Santos is now operator of the country's lone offshore operating gas field Sangu. Santos is now 100 per cent owner of offshore Magnama and Hatiya structures under block 16 in the Bay of Bengal. In Sangu gas field Santos has 75 per cent stake, while Halliburton Energy of the USA will have 25 per cent stake. Prior to acquisition Santos held 50 per cent stake in offshore Magnama and Hatiya structures and 37.5 per cent stake in Sangu gas field. The country now urgently requires new gas finds to feed the growing economy which has been undergoing growth at an average of six per cent in the recent years. Average daily gas production is now hovering around 1,980 million cubic feet per day (mmcfd) against the demand for more than 2,500 mmcfd. Petrobangla has suspended new gas connections to industries since July 2009 and to households since July 2010. Gas rationing has been rampant and CNG filling stations are kept closed four hours a day to cope with the gas supply shortfall. The government has decided to import expensive liquefied natural gas to meet the mounting gas demand.
Country's much-needed gas exploration worth US$105 million in offshore gas fields appears uncertain in the coming winter too as the operator, Australian Santos, has sought amendment to existing gas sales deal first, officials said Wednesday. Santos' predecessor, the UK's Cairn Energy, similarly avoided conducting exploration in offshore gas fields last winter due to government's delay in amending a production-sharing contract (PSC). "We need a government decision by March 31 next so that we can complete necessary deals with rig, helicopter and ship providers by April and initiate drilling from October 2011," a company insider said. Otherwise, the company will not be able to conduct drilling of exploration wells under block 16 in the Bay of Bengal in next winter spanning from October 2011 to April 2012, he said. "The energy ministry will decide over Santos's plea," Petrobangla Director on PSC Muhammad Imaduddin told the FE. Officials said drilling in offshore gas structures by Santos is necessary to ensure that gas-guzzling industries and power plants do not face forced closure due to gas supply shortfall. Santos believes that a necessary amend ment to its existing gas purchase and sales agreement (GPSA) with state-owned Petrobangla will pave the way for the company to sell gas output at higher rates to private users avoiding Petrobangla. Before Santos's acquisition of the UK's Cairn Energy in Bangladesh in November 2010, Cairn had obtained the government's approval of right to sell gas from its new structures to private buyers. Cairn, the previous operator of block 16, had also signed an amendment to the production sharing contract (PSC) under which the operator would be able to negotiate with buyers besides Petrobangla for sale of gas. Following the PSC amenedment Santos became the first foreign company operating in Bangladesh to sell gas directly to private sector. But for effectiveness of the PSC, amendment to the existing GPSA is required, said the company insider. Under the existing GPSA, Santos can sell gas to Petrobangla at a maximum price of U$2.90 per unit (1000 cubic feet). Petrobangla in December last year approved Santos's US$105 million investment plan for drilling in three prospective locations stretching over 8,621 sq km in the Bay of Bengal. Santos along with its previous partner Cairn had spotted three prospective drilling locations - Sangu 11, South Sangu and Magnama - after conducting comprehensive 3D (3-dimension) surveys. They shared the 3D outcome with Petrobangla recently, but said actual gas reserves in these locations could be determined after drilling. Santos and its partners had detected gas presence in offshore gas structures following 2D seismic surveys in 2008. Australian Santos is now operator of the country's lone offshore operating gas field Sangu. Santos is now 100 per cent owner of offshore Magnama and Hatiya structures under block 16 in the Bay of Bengal. In Sangu gas field Santos has 75 per cent stake, while Halliburton Energy of the USA will have 25 per cent stake. Prior to acquisition Santos held 50 per cent stake in offshore Magnama and Hatiya structures and 37.5 per cent stake in Sangu gas field. The country now urgently requires new gas finds to feed the growing economy which has been undergoing growth at an average of six per cent in the recent years. Average daily gas production is now hovering around 1,980 million cubic feet per day (mmcfd) against the demand for more than 2,500 mmcfd. Petrobangla has suspended new gas connections to industries since July 2009 and to households since July 2010. Gas rationing has been rampant and CNG filling stations are kept closed four hours a day to cope with the gas supply shortfall. The government has decided to import expensive liquefied natural gas to meet the mounting gas demand.