State-owned Petrobangla is set to sign a production sharing contract (PSC) with US oil major ConocoPhillips for awarding it a contract for another gas block in the Bay of Bengal.
Both sides are scheduled to ink the deal on Wednesday afternoon, officials told UNB on Tuesday.
In an international bidding floated in early 2012, ConocoPhillips obtained the block SS-7 while Indian company ONGC got blocks SS-4 and SS-9.
Petrobangla has already signed its contract with the Indian company last month. Through signing the deal with Conoco, it will end up its process to award the three shallow water gas blocks for which it received proposals in a tender invited in 2012.
Earlier, Petrobangla received all necessary approvals from the government’s top policymaking level. “The Cabinet Committee on Economic Affairs has already given its nod to the proposal,” said a Petrobangla director.
ConocoPhillips is already engaged in two other gas blocks in the country’s offshore areas. Through Wednesday’s deal, it will get another field in addition to its existing operation in the two deep sea blocks.
State-owned Bangladesh Petroleum Exploration and Production Company Ltd (Bapex) will have a 10 percent carried interest stake in the Conoco’s block as per the PSC condition.
The area of the block ranges from 4,463 to 7,692 sq km (1,723-2,970 sq miles), at water depth of 3-200 meters.
Officials said ConocoPhillips and ONGC Videsh Ltd were the only two firms that submitted bids for the total three blocks at the close of bid submission deadline on April 2 against nine shallow water blocks Bangladesh offered in the latest bidding round in December 2012.
Under the model PSC for the shallow water blocks, the gas price has been tagged with high sulfur fuel oil prices.
The floor price for HSFO has been fixed at $100 per tonne and the ceiling price at $200 per tonne.
As per this calculation, the gas price of this block will be around $5.50 per unit (1,000 cubic feet). Under the largest PSC, the gas field operators will have to pay 37.5 percent corporate tax.
The other features of the PSC are: The licence holder will have the right to full repatriation of profits; will not be charged any signature bonus or royalty; would not need to pay duty for equipment and machinery imported for operations during the exploration, development and production phases; will have 100 percent cost recovery; and production bonuses, the official said.
The contractor can also sell gas independently to third parties instead of going through state-run Petrobangla.
The company will be allowed to market the gas domestically as well, but Petrobangla will have the first right to refusal.
Officials said both the US and the Indian companies were called up by Petrobangla to sign the deals at the end of the last year. But both the companies were found reluctant in the turbulent political situation.
After assuming office by the Awami League government again through the January 5 general election, both ONGC Videsh Ltd and ConocoPhillips were again invited to sign the contract.
Source: UNBConnect
