Anisul Islam Noor :
The government is likely to amend the Revised Model Production Sharing Contract(PSC)-2012 as per demand of the foreign oil and gas exploration companies.
The expert of this sector expressed their concerned adding that more financial benefits might be given to Norwegian company Statoil in oil and gas exploration in three deep sea blocks in the Bay of Bengal.
The Statoil has demanded for two per cent annual rise in the price of gas from the offshore blocks although the price, in the Model PSC- 2012, is fixed at US$ 6.5 per thousand cubic feet, Power Ministry official said.
Petrobangla recently reassessed its status in the light of the PSCs in Myanmar and Thailand. It came up with some suggestions and sent those to the energy ministry. However, it observed that the financial package given in the 2012 model PSC also lacks enough incentives.
Ministry official said in addition to increasing gas price in line with Myanmar or Thailand, the PSC should also recognize the fact that oil companies would have to install hundreds of kilometres of pipeline at a depth up to 1,500 metres under the sea.
Pipeline construction alone can claim 30 per cent of a gas field development cost, which is around 10 percent in shallow water of the Sangu field.
According to Petrobangla, Statoil would spend $109m on the exploratory well and other work in each block and deposit the amount as bank guarantee as per the bidding proposal. But now Statoil will spend the money for exploration of these sea blocks
But the amendment of model PSC after completion of a bid process would be the first instance in Bangladesh’s history of awarding PSC to any International Oil Company, they said.
Prime Minister’s Energy Adviser Tawfiq-e-Elahi Chowdhury in a meeting with Petrobangla on Tuesday asked Petrobangla to invite Statoil to discuss about its demands that included the annual price escalation of gas, sources said.
Under the Model PSC- 2012, a joint-venture of Statoil and the US oil company ConocoPhillips alone submitted bid and won the contract for hydrocarbon exploration in the three deep sea blocks 12, 16 and 21 in the Bay.
Statoil became the lone authority of the bid as Conoco on April 23 informed the government that it would not continue with the joint-venture. Statoil, however, gave three conditions before signing the PSC for the offshore blocks including the provision of annual price escalation of gas which it would sell to Petrobangla.
The other two demands were that Statoil would be entitled to get the benefits offered in the future model PSCs and make the provision of gas sales point flexible which is specified in the Model PSC- 2012. Statoil came up with the demands even after the government had revised the Model PSC-2012 before bid offering more financial benefits that included the increase in gas price from US$ 5 to US$ 6.50 per thousand cubic feet of gas.
The government had also increased the ceiling of cost recovery from 55 per cent to 70 per cent for an IOC in exploring oil and gas in the offshore blocks. Among other benefits in the revised Model PSC, Petrobangla took the responsibility of paying corporate taxes on behalf of the IOCs and a four per cent tariff on using gas pipelines of Petrobangla was waived.
An energy division report, which was presented at Tuesday’s meeting, said the oil and gas exploration in the deep sea would be delayed by two to three years if Petrobangla does not sign a deal with Statoil. Meantime, Conoco on October 26, 2014 relinquished two deep sea blocks 10 and 11, under Model Production Sharing Contract-2008 saying that prospect of a reserve of 4-5 trillion cubic feet in the blocks was not financially viable.
Besides, the report also said that the information about the hydrocarbon resources in the three blocks would not be available until another company is awarded through a fresh round of international tenders as the blocks were not included in the tenders for conducting two dimensional seismic surveys in the Bay of Bengal.
