State-owned hydrocarbon corporation Petrobangla has moved to further amend the Model Production Sharing Contract (PSC) 2019 in order to attract international oil companies (IOCs) amid the hike in fuel prices in the international market.
The principal upstream energy body is going to appoint an experienced foreign consultant to draw the amendments that would convince the IOCs to invest in Bangladesh’s offshore gas fields. “We have already sought expressions of interest (EOI) from interested parties to choose a consultant for the job,” said Shahnewaz Parvez, General Manager (Contract) of Petrobangla.
Official sources said the recent excessive hike in petroleum fuel, especially that of liquefied natural gas (LNG) has prompted the government to go for further amending the existing PSC to attract the IOCs to invest in Bangladesh’s offshore gas blocks. The country has now a total of 48 blocks of which 26 are located in offshore areas and 22 onshore. Of the 26 offshore blocks, 11 are located in shallow sea (SS) water while 15 are located in deep sea (DS) water areas.
Of these, 24 offshore gas blocks remained open for IOCs while two blocks —SS-04 and SS-09—are under contract with a joint venture of ONGC Videsh Ltd and Oil India Ltd where drilling works have recently started. Official sources said that the government had amended the Model PSC last in mid of 2019 raising the gas price for IOC to $5.5 per thousand cubic feet (MCF) for shallow water blocks and $7.25 per MCF for deep sea blocks from below $5 per MCF.
There was a target to invite international bidding in March 2020 for exploration in offshore areas, which was postponed due to the Covid-19 pandemic that emerged at exactly the same time. “The recent upward trend in oil and gas prices has pushed the policymakers to further raise the gas price by introducing much more flexibility and incentives including keeping the export option open in the PSC,” said another Petrobangla official.
He dropped an indication that gas price might be increased up to $7.25 per MCF for shallow sea blocks while $8.5 per MCF for deep sea blocks considering the upward global trend in petroleum price. He mentioned that the government had to import LNG at $36 per MMBtu while it was just below $10 early this year. Recently, the World Bank also made a prediction that the petroleum price might not see any fall until the end of 2022.
Under a Model PSC, normally, if any IOC discovers gas, it gets 40% stake while the government obtains the remaining 60%. The government also buys the IOC’s gas at a certain price. So, if the gas price is raised, IOCs feel encouraged to invest in exploration works, said the Petrobangla officials.
They said this is the first time, at least a 15-year experienced foreign firm will be hired to help the government to prepare the amendments in the PSC as foreign companies can give best suggestions as to which kind of incentives should be offered to attract IOCs.
Officials said the Energy and Mineral Resources Division had instructed Petrobangla to hire such a consultant in February this year. But the negligence of some top officials delayed the work. They said Petrobangla now plans to complete the appointment of consultants within the next two months and receive their report by April next year. It hopes to complete the amendments by May and invite international bidding for IOCs in June next year in order to start exploration works before the end of 2022.
Officials said that the foreign contractor, which was awarded a contract to conduct a multi-client seismic survey in the offshore sea blocks, has also suggested updating the Model PSC to attract IOCs in the changed scenario in the global petroleum market.
Bangladesh’s offshore area remained unexplored despite it had settled its dispute with neighbouring Myanmar and India over the maritime boundary almost eight years ago. It has had no success in the exploration of oil and gas in its offshore areas located within its maritime boundary, said an energy expert wishing not to be named.
