Tender floated for offshore oil, gas exploration

Petrobangla yesterday floated the offshore bidding tender inviting international oil and gas companies (IOCs) to explore Bangladesh's maritime area in the Bay of Bengal.

The development is the first major initiative by the government to exploit the natural resources from the sea after maritime border disputes were settled with India in 2012 and with Myanmar in 2014.

Nine out of the 11 blocks of the shallow sea (SS-01, 02, 03, 05, 06, 07, 08, 10 and 11) and all 15 deep sea blocks (DS-08 to DS-22) will be available for bidding, said the tender notice published on the Petrobangla website. The other two shallow blocks were left out as the Oil and Natural Gas Corporation of India is working on them.

The IOCs that have an offshore daily production of at least 15,000 barrels of oil or 150 million cubic feet of gas a day (mmcfd) will be allowed to participate in the bid.

The bidders must have exploration experiences in at least one country other than the company's home country. The companies will be allowed to bid for one or more blocks.

Contracts will be signed with the IOCs in line with the Model Production Sharing Contract (PSC) 2023, the notice said.

On July 26 last year, the government approved the PSC that allowed the government's profit share to be 40 percent at least and 65 percent at best in the case of shallow blocks. For deep sea blocks, it would be a minimum of 35 percent and a maximum of 60 percent.

This is the first attempt to get IOCs in offshore exploration after 2016.

In 2019, Petrobangla had finalised a PSC but stopped short of floating the tender saying that the IOCs were not interested in participating.

At that time, the gas price was fixed at a rate, but the new PSC said the price would be fixed at 10 percent of Brent Crude price.

The other attractive features of the tender include full repatriation of profit, no signature bonus or royalty and oil price determined based on the fair market value prevailing in South and South East Asia.

The contractor's corporate income tax liability will be borne by Petrobangla, while there is a provision for assignment of interest and share transfer and 100 percent cost recovery with a yearly cap of 75 percent.

There will be no duty for equipment and machinery imported for petroleum operations.

The contractors will be allowed to sell their share to a third party if Petrobangla refuses to buy it. In the case of shallow sea blocks, the state-owned exploration company BAPEX will have a 10 percent carried stake.

Yesterday's notice said the bidders must buy the available 2D multi-client seismic data against the blocks they intend to bid for from the TGS-Schlumberger.

A joint venture of TGS-Schlumberger has recently completed the multi-client survey of the Bay of Bengal.

The Petrobangla has mainly two types of data available to sell to the bidders: a basic geological information package for $300 and a promotional data package at $10,000 or equivalent Bangladeshi taka.

The promotional data is optional and some more data packages are available at different prices, the notice added.

Interested companies may ask for clarifications on the terms and conditions of the bid by the next 30 days.

The submission deadline for bidding documents will be 1.00 pm on September 9. At around 2.00 pm on the same day the public opening of the documents will take place, it added.

"The 'once blessed offshore resources' are going to be a curse at some point in future -- we will have to buy our own resources with a higher price from the IOCs," said Anu Muhammad, former member-secretary of the National Committee to Protect Oil, Gas, Mineral Resources, Power and Ports.

Besides, the IOCs will produce gas more and more for their own interest to recover their costs and to get profit.

"This may create a financial burden for us. Say we can't buy that much gas in future due to financial crisis or something else, we will lose our extracted gas under the provisions of exporting gas in the new PSC."

Offshore gas exploration has been under discussion since 2008.

"The government has always said that we do not have the capacity to extract gas by ourselves. We had enough time to build our capacity but we didn't focus on that," Mohammad added.

The move to get IOCs involved in offshore exploration has come belatedly, said Badrul Imam, honorary professor of the University of Dhaka's geology department.

"We needed to appoint the IOCs many years ago. If we had been appointed them 10 years ago, we could have gotten gas from there now. I don't know why the government made such a delay [in engaging the IOCs]."

The relaxation of some terms and conditions in the PSC to attract international companies is acceptable.

"We still don't know what opportunity is there. If the companies start offshore exploration, we will get more data and will be able to identify new opportunities. At that point, we can bargain to increase our stake."