A new Production Sharing Contract (PSC) was signed in 2019 but no bidding was called. After nearly four years, the cabinet gave final approval to the new PSC last July.
After eight years, Bangladesh will float a new international tender today for oil and gas exploration in a total of 24 blocks, with 15 located in deep waters and nine in shallow waters, in the Bay of Bengal.
Interested companies will have the opportunity to participate in the tender over the next six months. According to Petrobangla sources, 55 companies, including US multinationals ExxonMobil, Chevron, ConocoPhillips, and China’s Sinopec, have been invited to take part in it.
“We have sent direct invitations to 55-56 companies. However, companies from any country in the world have the opportunity to participate as the tender is open,” said Janendra Nath Sarkar, chairman of Petrobangla, a state-owned agency responsible for exploring, producing, transporting, managing, and selling oil, natural gas, and other mineral resources.
“After inviting tenders, we will conduct roadshows in different countries, which will be various seminars of a promotional type,” he told The Business Standard.
“We have opened up everything this time; everything is being done transparently. We have amended the production sharing contract to attract multinational companies. Negotiations will be conducted with the companies in this regard.”
Bangladesh has a total of 26 blocks in the Bay of Bengal. Currently, India’s state-owned Oil and Natural Gas Corporation (ONGC) is working in two blocks in the shallow waters, where the depth is up to 200 metres.
“The deadline for the submission of proposals for oil and gas exploration in 24 offshore blocks is the first week of September. Afterward, they will be evaluated. We hope that it will be possible to enter into agreements in this regard by the end of this year,” Sarker said.
He said companies can participate in the process from the day the tender is floated, and if any company wants, it can have a one-on-one direct meeting with Petrobangla later. “A company in Thailand has already expressed interest in having a one-on-one meeting with us.”
Tawfiq-e-Elahi Chowdhury, adviser to the prime minister on power, energy, and mineral resources, told reporters on 7 March, “We expect a good response from the tender.”
According to PretroBangla, the last tender for offshore oil and gas exploration was called in 2016.
A new Production Sharing Contract (PSC) was signed in 2019 but no bidding was called. After nearly four years, the cabinet gave final approval to the new PSC last July.
PSC made favourable to attract multinationals
Currently, only ONGC is conducting exploration in the Bay of Bengal. However, the US company ConocoPhillips, British firm Cairn, and South Korea’s Daewoo have abandoned exploration in the Bay of Bengal unfinished after their demand for increasing the price of deep-sea gas went unmet.
Since then, several initiatives to float international tenders have been taken, but there has been no response from foreign companies.
As Petrobangla has updated its production sharing contract (known as PSC-2023), many oil giants, including Chevron and ExxonMobil, have shown interest in investing in offshore oil and gas exploration. They have already held several meetings with Bangladesh.
According to PSC-2019, the price of every 1,000 cubic feet of gas was fixed at $7.25 for deep waters and $5.5 for shallow waters.
However, there is no set price for the new PSC. The price of gas has been fixed at 10% of the price of Brent crude oil – the most traded of all the oil benchmarks in the world.
If the price of fuel oil increases or decreases in the world market, the price of gas will also increase or decrease proportionally. Now the price of crude oil is $80 per barrel. According to this, the price of gas in the Bay of Bengal will be $8. But if the price of fuel oil is $100, the price of gas will be $10.
The formula for profit-sharing between multinational companies acting as contractors and Petrobangla has been changed this time. Previously, the two sides used to share profits after deducting investment and operating expenses.
Based on the amount of gas production, Petrobangla used to receive 55-80% of the profit. If production increased, Petrobangla’s profit share would also increase.
However, this time, the total revenue earned from the gas field will be shared. Petrobangla will receive 35-65% of the revenue share.
The country’s first production sharing contracts were signed in 1995 based on unsolicited negotiations with British Cairn for blocks 15 and 16. Cairn discovered the offshore Sangu field in 1996, and it produced gas until 2013.
The other PSCs for blocks 12, 13, and 14 were signed with the US company…
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