Anisul Islam Noor :Bangladesh Petroleum Exploration Company (BAPEX) will start oil and gas exploration in offshore from next February jointly with Australian company Santos. But experts warned saying that BAPEX chose a risky and expensive venture.The state-owned entity signed a deal on Monday in this regard. Under the ‘binding offer agreement’ BAPEX will carry out offshore drilling jointly with Santos at Magnama structure in the Bay of Bengal, BAPEX Managing Director Md Atiquzzaman said.BAPEX managing director said that the required investment would be provided from the Gas Development Fund created in August 2009 through an 11.22 per cent hike in gas prices to increase the financial capacity of state-run gas exploration companies.Santos will be paid US$16.50 million as ‘sunk cost’ for engaging in the joint venture (JV) to explore the offshore well, he said.As per the agreement, to form the joint venture company with Santos 49 per cent stakes from BAPEX. Santos holds 51 per cent stakes and operatorship of exploration. The structure has a prospect of 250-350 billion cubic feet of gas reserve. But the experts opined that it is too deep from sea surface to extract oil and gas from onshore block.Energy expert Badrul Imam, also Dhaka University Geology Department Professor, said that BAPEX chose a risky and expensive venture.Professor Shamsul Alam said, BAPEX takes a risk where the Santos and Cairn couldnot become success the from 2006. ‘It is not clear what benefit BAPEX would gain from the investment,’ he said, adding that BAPEX could explore other onshore structures like Chatak, Patiya, Jaldi etc by its own means.Both the parties would sign the contract to form the company later after obtaining approvals from different ministries, said BAPEX Managing Director Md Atiquzzaman.He said that BAPEX board and its parent organisation Petrobangla, the state-run Oil, Gas and Mineral Resources Corporation, had approved the agreement earlier.The agreement would enable BAPEX and Santos to initiate preparation so that the joint venture company would drill an exploration well at Magnama in January-February 2017, said Santos country lead Mahmudul Karim.Hiring drilling rigs and other services require seven to eight months before drilling operations, he said.The joint venture would need to invest approximately $26 million for drilling an exploration well at Magnama, of which BAPEX would provide $12.74 million, said Atiquzzaman.He said that BAPEX would also pay $16.15 million to Santos as it had agreed to share 17.5 per cent of $92.3 million investment that Santos and its predecessor Cairn Energy made since 2007-08 in exploration at Magnama structure.The joint venture will be allowed to sell the produces to any third party at a negotiable price bypassing Petrobangla, according to the revised production sharing contract.Atiquzzaman said that they were hopeful of selling natural gas at $7 to $8 per thousand cubic feet to any third party which would ultimately make the investment viable.In November 2010, Santos became 100 per cent owner of the offshore Block-16, following acquisition of Cairn Energy’s interests in Bangladesh.In September 2010, the government accepted a proposal of Cairn to amend the Production Sharing Contract for offshore Block-16 as the company threatened that it would not invest in Sangu field and Magnama unless it was allowed to sell gas directly to a third party at a negotiated rate.Santos and Bapex earlier had entered a ‘confidentiality agreement’ in January for forming the JV to drill offshore Magnama structure.It only drilled onshore gas wells inside the country in gas fields either owned by Bapex or different state-run gas-marketing and- distribution companies.BAPEX has currently seven gas-producing fields across the country from which it produces around 105 million cubic feet per day (mmcfd) of natural gas against the fields’ overall capacity of 143 mmcfd.Its natural gas production is only 3.80 per cent of the country’s overall natural gas output of around 2,720 mmcfd, according to Petrobangla data as on June 26.
