Search for hydrocarbons must go on
Monday, 23 March 2009
Shamsul Huq Zahid
The hope for striking gas in some of the offshore blocks which were earlier considered highly prospective is fading fast.
The international oil companies (IOCs) that were awarded the right to explore hydrocarbon deposits in the offshore blocks in the early and mid nineties and the IOCs that purchased exploration rights from the original successful bidders later are now coming out with the chilling news that a vast swathe of coastal areas have little to offer to this poor and energy-starved nation.
The British Cairn energy and its partner Australian Santos were the first IOCs to break the news for which the nation was ready. The IOCs concerned informed the Petrobangla, the state-owned oil corporation, early last month that they were relinquishing their exploration rights over the block 5 covering an area of nearly 11000 square kilometres in greater Khulna district and parts of the world's largest mangrove forest, the Sundarbans.
The reason for leaving the block was that the seismic surveys conducted by the IOCs concerned at a cost of over $9.5 million had found the block 5 'near barren', meaning that lifting of hydrocarbon deposits detected there would not be commercially viable.
It did not take too long a time for some other IOCs working jointly under the leadership of the French oil giant, Total, to inform the Petrobangla about yet another piece of bad news. These IOCs working in blocks 17 and 18, actually, did a little bit of drama with the results of their 3D (three dimensional) seismic survey findings carried out in the blocks at a cost of around $30 million.
Initially, the companies informed the Petrobangla that the seismic survey had detected the presence of hydrocarbon in the offshore blocks 17 and 18 covering an area of 18,367 kilometres in the Cox's Bazaar district and parts of the Bay of Bengal and the final results would be communicated later.
However, the IOCs, namely, the Total, Irish Tullow, Thai PTTEP and US Oakland and Rexwood, a few days later, told the Petrobangla that they were withdrawing their exploration rights from the blocks since the presence of hydrocarbon-275 billion cubic feet (bcf), there was not viable for commercial exploitation.
The withdrawal of rights of exploration in block 5 and later in the blocks 17 and 18 by the IOCs are the first two instances in the history of hydrocarbon exploration in Bangladesh where IOCs have relinquished their rights of exploration. The voluntary withdrawal of rights allows the Petrobangla to offer the blocks to some other companies for exploration. Usually, IOCs show little interest in blocks that have been abandoned by some other fellow companies after seismic surveys.
However, one US oil company, according to a report published in the FE, has shown interest in the blocks abandoned by the Total and its partners. The company would send a team to Dhaka soon to hold discussion with the Petrobangla in this connection.
The developments relating to blocks 5, 17 and 18 have surely come as a shock to the Petrobangla. But the same should strengthen the resolve of the corporation to expedite the search for hydrocarbon in the remaining offshore blocks for which international bids were invited a few months back.
There is no denying that the findings of the Cairn and the Total would put a damper on the IOCs that have submitted bids for the remaining blocks in the Bay. But such developments are nothing unusual in the exploration of oil and gas worldwide. Rather success rate in the search for hydrocarbon in Bangladesh is one of the highest in the world.
The government should take the issue of resolving the disputes over territorial waters with neighbouring India and Myanmar as a priority task. It is most likely that both India and Myanmar which are already engaged in exploration in the Bay and have hit large reserves of gas would be unwilling to talk. But the government should use all channels to bring them to the negotiating table.
Meanwhile, the Cairn has asked the government either to pay higher rates for the gas it purchases from the company or grant the right to sell gas to a third party. Either of the propositions does contradict the provisions of the production sharing contract signed between the Cairn and the government.
Actually, the IOCs are always after maximizing their profits, often very unfairly. For their own benefit, the IOCs have the history of being instrumental in changing governments through military coups or civil unrest and bribing politicians and civil and military bureaucrats in the third world countries.
Allegations have it that the PSCs signed during the early and middle part of the nineties protected the interest of the IOCs more than that of the country. The Cairn cannot ask for higher price for gas it sells to the Petrobangla. Besides, the government cannot accept the Cairn proposal for selling gas to a third party since the government would have to buy gas at a very high price from the third party. If the government makes regular payment against the purchase of gas, the Cairn is bound to sell gas at prices fixed in the original PSC.
The hope for striking gas in some of the offshore blocks which were earlier considered highly prospective is fading fast.
The international oil companies (IOCs) that were awarded the right to explore hydrocarbon deposits in the offshore blocks in the early and mid nineties and the IOCs that purchased exploration rights from the original successful bidders later are now coming out with the chilling news that a vast swathe of coastal areas have little to offer to this poor and energy-starved nation.
The British Cairn energy and its partner Australian Santos were the first IOCs to break the news for which the nation was ready. The IOCs concerned informed the Petrobangla, the state-owned oil corporation, early last month that they were relinquishing their exploration rights over the block 5 covering an area of nearly 11000 square kilometres in greater Khulna district and parts of the world's largest mangrove forest, the Sundarbans.
The reason for leaving the block was that the seismic surveys conducted by the IOCs concerned at a cost of over $9.5 million had found the block 5 'near barren', meaning that lifting of hydrocarbon deposits detected there would not be commercially viable.
It did not take too long a time for some other IOCs working jointly under the leadership of the French oil giant, Total, to inform the Petrobangla about yet another piece of bad news. These IOCs working in blocks 17 and 18, actually, did a little bit of drama with the results of their 3D (three dimensional) seismic survey findings carried out in the blocks at a cost of around $30 million.
Initially, the companies informed the Petrobangla that the seismic survey had detected the presence of hydrocarbon in the offshore blocks 17 and 18 covering an area of 18,367 kilometres in the Cox's Bazaar district and parts of the Bay of Bengal and the final results would be communicated later.
However, the IOCs, namely, the Total, Irish Tullow, Thai PTTEP and US Oakland and Rexwood, a few days later, told the Petrobangla that they were withdrawing their exploration rights from the blocks since the presence of hydrocarbon-275 billion cubic feet (bcf), there was not viable for commercial exploitation.
The withdrawal of rights of exploration in block 5 and later in the blocks 17 and 18 by the IOCs are the first two instances in the history of hydrocarbon exploration in Bangladesh where IOCs have relinquished their rights of exploration. The voluntary withdrawal of rights allows the Petrobangla to offer the blocks to some other companies for exploration. Usually, IOCs show little interest in blocks that have been abandoned by some other fellow companies after seismic surveys.
However, one US oil company, according to a report published in the FE, has shown interest in the blocks abandoned by the Total and its partners. The company would send a team to Dhaka soon to hold discussion with the Petrobangla in this connection.
The developments relating to blocks 5, 17 and 18 have surely come as a shock to the Petrobangla. But the same should strengthen the resolve of the corporation to expedite the search for hydrocarbon in the remaining offshore blocks for which international bids were invited a few months back.
There is no denying that the findings of the Cairn and the Total would put a damper on the IOCs that have submitted bids for the remaining blocks in the Bay. But such developments are nothing unusual in the exploration of oil and gas worldwide. Rather success rate in the search for hydrocarbon in Bangladesh is one of the highest in the world.
The government should take the issue of resolving the disputes over territorial waters with neighbouring India and Myanmar as a priority task. It is most likely that both India and Myanmar which are already engaged in exploration in the Bay and have hit large reserves of gas would be unwilling to talk. But the government should use all channels to bring them to the negotiating table.
Meanwhile, the Cairn has asked the government either to pay higher rates for the gas it purchases from the company or grant the right to sell gas to a third party. Either of the propositions does contradict the provisions of the production sharing contract signed between the Cairn and the government.
Actually, the IOCs are always after maximizing their profits, often very unfairly. For their own benefit, the IOCs have the history of being instrumental in changing governments through military coups or civil unrest and bribing politicians and civil and military bureaucrats in the third world countries.
Allegations have it that the PSCs signed during the early and middle part of the nineties protected the interest of the IOCs more than that of the country. The Cairn cannot ask for higher price for gas it sells to the Petrobangla. Besides, the government cannot accept the Cairn proposal for selling gas to a third party since the government would have to buy gas at a very high price from the third party. If the government makes regular payment against the purchase of gas, the Cairn is bound to sell gas at prices fixed in the original PSC.