The government is reportedly considering a hike in gas price to be produced from new offshore blocks. This move comes following the demand made by the prospective bidders among the international oil companies (IOCs) for the country's off-shore blocks.
Some such prospective bidders consider the current price as being 'low'.
A pre-bid meeting for the offshore blocks was arranged in the city early last month by the government after much foot-dragging. In the meeting, the IOCs, according to reports, sought higher prices for output of gas from Bangladesh's new offshore blocks in the Bay of Bengal, in the event of its discovery there. The gas price offered under the model production sharing contract (MPSC) offshore bidding round, as their argument in favor of such a hike in the price of gas indicated, was not attractive and below the internationally accepted level.
Under the MPSC of the just-opened 2012 offshore bidding round, the gas price was pegged to high sulfur fuel oil prices, with the floor price for HSFO (high sulfur fuel oil) being fixed at US$ 100 per tonne and the ceiling price, at $200 per tonne. On the basis of this, Petrobangla proposed a 10 per cent hike in gas price and sought the approval of the ministry of energy & power.
Many noted IOCs participated in the pre-bid meeting. Petrobangla declared the bidding round open on December 9, 2012, and the deadline for bid submissions was fixed at March 18, 2013. It has put on offer a total of 12 dispute-free oil and gas blocks - nine in shallow waters and three in deep waters - under the country's fourth round of bidding. Under the latest bidding round, export of gas has been prohibited. The IOCs will be able to sell the gas produced directly to third parties in the domestic market, without going through Petrobangla, but the latter will have the first right of refusal.
As the deadline for bid submission is nearing, it is yet to be ascertained as to how many IOCs will take part in the bid. This all-important bid was postponed or cancelled several times due to procedural delays and bureaucratic tangles. In fact, the internationally well-recognised IOCs were reluctant to come to Bangladesh for oil and gas exploration for dearth of sufficient data about the possibility of their reserves. Those who came earlier were not quite keen about exploration activities in the off-shore areas of Bangladesh, considering particularly their high drilling and exploration costs. Many companies who were awarded the contracts following earlier rounds of bidding, left Bangladesh after a brief stay, selling their stakes to other IOCs.
The country passed the leanest decade of exploration activities, in pursuit of efforts for discovery of new gas reserve, in its history as a consequence of a lackadaisical approach to new exploration activities relating to hydrocarbon resources. During 2001-2010, Bangladesh discovered only one new gas-field - the Tullow-operated Bangura in 2004, with reserves of only around 500 billion cubic feet (Bcf). The Bangura discovery was made six years after the previous discovery of Chevron's Bibiyana gas-field in 1998.
The activities of the IOCs in Bangladesh have not been otherwise noteworthy on any reasonable count. Bangladesh inked the latest production sharing contract (PSC) with the US-based ConocoPhillis in 2011, one decade after the previous signing of PSCs with British Shell Oil and Cairn Energy in 2001. However, the IOCs' share in the country's overall gas production witnessed a five-fold increase, from an average 214 MMcfd in 2001 to 1,087 MMcfd in early 2012.
There is hardly any alternative for Bangladesh to that of offering more contracts to the IOCs to help accelerate the pace of its exploration and drilling activities, particularly in the offshore areas, to ensure the country's future energy security. The state-run entities have neither the financial muscle nor technological capability to do that.
Meanwhile, Bangladesh's neighboring countries have done commendably well about hydrocarbon exploration ventures. Both Myanmar and India have succeeded in discovering large gas fields in their offshore zones in the Bay. Bangladesh remains far behind in this particular area of activities and has thus failed to tap properly the potential of its deep sea hydrocarbon resources in a timely way. Activities in this sector are thus yet to open a new chapter, unlike the cases with its neighbors. A proper utilization plan has not been worked out and only some unplanned activities have so far taken place, mostly on political considerations, as far as Bangladesh is concerned.
Geologists, however, have been hinting at high prospects of striking oil and gas in the Bangladesh territory in the Bay. For lack of effective media coverage, such possibilities still remain as largely 'unknown quantities' to those in the world outside. The government needs to take some prompt actions for disseminating proper information about such potential or prospects. If IOCs could be engaged properly in the offshore exploration drives, reaping some gains expeditiously would have, perhaps, been possible. Even discovery of hydrocarbon resources on a modest scale in the offshore fields may usher in a new era for Bangladesh. As such, no time should be wasted for making a spirited drive for the purpose.
Some conservative estimates put the national demand for gas at around 50,000 MMcf by 2020, in the context of the targeted plus 7.0 per cent growth rate of Bangladesh's gross domestic product (GDP) in order to realize its cherished goal of becoming a middle income country around that time. With that end in view, about 24 trillion cubic feet (Tcf) of hydrocarbon resources need to be discovered by 2025. Unless BAPEX makes some major strides for exploring gas in the Netrakona-Sunamganj onshore belt soon, the chances of overcoming the problem of a severe gas shortage within 2014 are quite slim. The Magnama and Hatiya structures have reportedly a substantial volume of gas reserve. This was evident after conducting a 3D survey there.
The country urgently needs massive investments by the IOCs, given the financial and technological constraints of its own state-run firms. Investment worth $25 billion is needed to tap the potential for striking gas in the Bangladesh part of the Bay of Bengal. An extensive exploration drive should start on both the country's onshore and offshore blocks soon by engaging more IOCs. Harnessing gas, in tandem with efforts to help augment power supply capacity, is of crucial importance at this critical time. Availability of energy resources including power supplies will matter most for investment activities, maximizing the utilization of existing production capacity in different sectors and thus accelerating the pace of the country's growth performance in the coming years.
Copyright 2013 The Financial Express All Rights Reserved
Generated by readers, the comments included herein do not reflect the views and opinions of Rigzone. All comments are subject to editorial review. Off-topic, inappropriate or insulting comments will be removed.
View the original article here
Posts
