SPA proposal goes to cabinet body tomorrow

A proposed sale and purchase agreement (SPA) on drilling offshore Magnama structure in the Bay of Bengal is scheduled to be placed at a cabinet body meeting tomorrow (Wednesday), officials said.
Bangladesh Petroleum Exploration and Production Company Ltd (Bapex) and Santos, an Australian oil and gas exploration company, will jointly carry out the drilling in the Magnama-2 structure subject to approval of the SPA by the cabinet committee on economic affairs.
The total drilling cost would be US$ 35 million.
However, Bapex would have to invest a total of $40.60 million - $ 23.10 million as 'sunk cost' and $ 17.50 million as Magnama-2 drilling cost - as Bapex in its recent board meeting endorsed the expenditure.  
As per the agreement, Santos Sangu Field Ltd (SSFL) will have 50 per cent stake in the well while Bapex 49 per cent and Santos Bangladesh Ltd 1.0 per cent.
Bapex would have the opportunity to carry out oil and gas exploration in offshore for the first time under the joint venture (JV) with Santos.
Before the deal, Santos had owned 100 per cent stake of the Magnama structure, following acquisition of Cairn Energy's interests in Bangladesh in November, 2010.
Earlier in June last year, Santos signed an agreement with the state-run Bapex to perform offshore drilling jointly in the structure.
Santos's predecessor UK's Cairn Energy has discovered the presence of natural gas in Magnama, penetrated by a single exploration well, around eight years ago.
The water depth of Magnama is up to 20 metres from the nearby onshore Kutubdia Island.
Interpretation of the survey had indicated the natural gas presence in the structure that consisted of a number of stacked structural stratographic reservoirs with at least four zones marginally intersected in the Magnama-1 discovery well, according to Bapex.  
Santos and Bapex earlier had inked a 'confidentiality agreement' in January last year for forming up the joint venture (JV).
It would help Bapex develop its technical know-how in offshore exploration.  Bapex never conducted oil and gas exploration offshore.
Bapex has currently seven gas producing fields across the country from which it produces around 105, 000 Mcf/d of natural gas against the fields overall capacity of 143,000 Mcf/d.
Bapex's natural gas production is only 3.80 per cent of the country's overall natural gas output of around 2.72 Bcf/d, according to Petrobangla data as on June 26.
The Magnama has potential hydrocarbon reserve of gas. The drilling at Magnama-2 well in Magnama structure is likely to start next month.
All necessary preparations like selecting a drilling contractor, purchasing of drilling equipment have been completed.
Magnama structure is located within block 16 areas where the now-shut Sangu well is located.
talhabinhabib@yahoo.com