State-owned Petrobangla got bids for a third of the total shallow sea blocks it offered as only two international oil and gas companies (IOCs) submitted tenders for three blocks before expiry of the deadline Tuesday.
“Two IOCs submitted bids for oil and gas exploration in three shallow sea blocks in the Bay of Bengal out of the total nine shallow sea blocks as offered,” Petrobangla director for production sharing contract (PSC) Muhammad Imaduddin said.
He said US ConocoPhillips and India’s ONGC Videsh submitted bids for three separate shallow sea blocks.
“ConocoPhillips submitted bid for oil and gas exploration in block — SS-04 — while ONGC Videsh for blocks — SS-07 and SS-09,” Imaduddin said.
State-owned Bangladesh Petroleum Exploration and Production Company Ltd (Bapex) will have 10 per cent carried interest stake in all the three shallow sea blocks.
The area of these blocks ranges from 4,463 square kilometres (sq kms) to 7,692 sq kms and water depth varies from three meters to 200 meters.
The IOCs have submitted expenditure commitment for a total of US$183 million for oil and gas explorations in three shallow water blocks during the eight years contract period with a five-year initial exploration duration and a three-year subsequent exploration period, Imaduddin said.
The contractors will, however, be allowed a period of 20 years for an oil field and 25 years for a gas field.
“The response from the IOCs for hydrocarbon exploration in shallow sea blocks is not encouraging,” Petrobangla Chairman Hussain Monsur said.
Non-availability of primary data in the offered shallow-sea blocks might be the reason of the lukewarm response from the IOCs, he observed.
“We were expecting that bids would be submitted for at least 4-5 blocks,” Imaduddin said.
He, however, said the exploration commitments as made by the two bidders in their offers are more than expected.
“Petrobangla will complete evaluating bids of ConocoPhillips and ONGC Videsh within this month and send it to the Energy Division of the Ministry of Power, Energy and Mineral Resources for final nod before awarding the blocks to the bidders,” he hoped.
In its bid for block SS-04, ConocoPhillips offered to spend $40 million including the bank guarantee of the same amount.
The US firm has committed to conduct at least 2,347 line km 2D seismic survey, 500 sq km 3D and drill one well during the contract period.
ONGC Videsh has committed to spend $58 million for block SS-04 and carry out 2,700 line km 2D seismic survey, 200 sq km 3D and drill two wells during the contract period.
For block SS-07, ONGC has committed to spend $85 million and conduct at least 2,850 line km 2D seismic survey, 300 sq km 3D and drill three wells during the contract period.
As per the model production sharing contract of the three shallow sea block gas price has been pegged to high sulfur fuel oil (HSFO) prices and the floor price for HSFO fixed at US$ 100 per tonne and the ceiling price at $200 per tonne.
As per contract the price is around at around $5.5 per Mcf (1,000 cubic feet) without the corporate tax. Corporate tax is to be paid by the contractors, Imaduddin said.
The gas price will be 100 per cent of HSFO ex Singapore price with biddable discounts.
In previous 2008 bidding round, the floor price for HSFO was fixed at $70 per tonne and the ceiling price at $180 per tonne.
The price under the 2008 bidding round calculated the gas price at around $4.5 per Mcf without the corporate tax, which is to be paid by the contractors.
The cost recovery limit shall be the maximum of 55% per calendar year of all available oil or natural gas or condensate or NGL from the contract area.
The contractors will enjoy full repatriation of profits with no signature bonus or royalty, no duties for equipment and machinery imported for operation during the exploration, development and production phases, provision of assignment of interest and share transfer, 100% cost recovery and production bonuses.
Gas export has been prohibited from all these blocks.
In 2008 bidding round, gas exports via pipeline were banned but liquefied natural gas (LNG) exports were allowed.
Companies would also be able to sell the gas produced directly to third parties in the domestic market, without going through Petrobangla but the latter will have first right of refusal.
If awarded, ConocoPhillips will have right to explore Bangladesh’s first discovered offshore gas field, Kutubdia as well, Imaduddin said.
Kutubdia was offered under a ‘special package and was tagged with SS-04 during the bidding round.
Under the special package, the contractor will have to give state-owned Petrobangla an additional 5.0 per cent of “profit-gas” to be produced, on top of Petrobangla’s regular profit-sharing structure.
Kutubdia gas field was discovered by now defunct California-based Union Oil in 1977 after conducting seismic survey and drilling a well there.
The field has a recoverable gas reserve of around 45.50 billion cubic feet (Bcf).
But the US firm left the field subsequently as it closed Bangladesh operation.
Petrobangla announced opening of the bidding round titled, “Bangladesh Offshore Bidding Round 2012”, on December 9, 2012 offering 12 ‘dispute-free’ oil and gas blocks — nine in shallow waters and three in deep waters.
Petrobangla received bids of shallow sea blocks Tuesday on the extended bid submission deadline.
Petrobangla will announce bid submission deadline for deep water blocks later after reviewing afresh the terms and conditions of the PSC, Imaduddin said.
In Bangladesh’s previous offshore bidding round in February 2008, seven IOCs had submitted bids for 15 offshore blocks when a total of 28 offshore blocks — 20 in deep waters and eight in shallow waters — were offered.
Petrobangla could award only two deep water blocks DS-08-10 and DS-08-11 partially to ConocoPhillips in the 2008 bidding round.
Source: Financial Express
