Anisul Islam Noor :
The government has decided to amend the model Production Sharing Contract 2012 in order to increase the price of gas produced by IOCs from deep sea blocks to encourage them in exploring gas in the Bay of Bengal.
As per the current provision in PSC, an IOC will sell around 50 per cent of the gas produced in deep sea blocks to Petrobangla at $ 6.50 per mcf (1,000 cubic feet). After amendment, the price will be $ eight per mcf, Petrobangla sources said.
In September 2013, the government, after its failure to attract bidders for deep sea oil and gas exploration, increased the price from $ 5.50 to $ 6.50 per mcf by amending the model PSC. The IOCs were also exempted from paying 37.5 per cent corporate tax and four percent transportation tariff for using Petrobangla’s transmission lines.
Petrobangla has been mulling the amendment after it invited fresh bids from international companies for two-dimensional (2D) seismic surveys of 21 hydrocarbon blocks in the Bay of Bengal in the mid-December. The blocks cover 81,000 square kilometers of area in the Bay, with depths varying from 20 metres to over 2,500 metres, the sources said.
The government will also finalize soon gas extraction policy in the Bay of Bengal keeping guide line that a single International Oil Company (IOC) will be eligible for one gas block only, Energy Division sources said. As per the direction of Prime Minister’s office, a strategic plan will be taken regarding oil and gas extraction in the Bay for curbing influence of the companies and establishing the government’s strong control in the sea boundary.
Besides, The Petrobangla official said that after completion of the 2D seismic survey, Petrobangla plans to invite bidding for oil and gas exploration in the offshore blocks. IOCs will be provided with 2D non-exclusive multi-client seismic data of the offshore blocks to help them carry out basin evaluation, prospect generation and participation in the bidding for exploration.
Talking to the reporter, M Kamruzzaman, Director (PSC) of Petrobangla, said that “nothing” has been finalised yet. “We are thinking of a price revision, but we have not fixed anything yet.”
When asked why Petrobangla has been planning to increase the price of gas when gas prices are declining across the world along with the fall in the price of fuel, Kamruzzaman said, Petrobangla has not decided anything yet.
“The price of gas is a changing thing. In Bangladesh, we have fixed a ceiling price of gas to protect the interests of the country, to prevent the economy from getting disrupted with changes in the price. The ceiling is currently fixed at USD 6.5. We are planning to revise it, but nothing has been decided yet,” he said.
The Petrobangla director, however, admitted that the price might be increased because Bangladesh has failed to attract IOCs with the current price. Dr M Tamim, Professor of Petroleum and Mineral Resources Engineering of Bangladesh University of Engineering and Technology (BUET), said, as per the current provisions, Petrobangla will have to pay 37.5 per cent in corporate tax on behalf of IOCs, which means if the price is increased from $ 6.5 per mcf to $ eight per mcf, then the price will actually be USD 10 per mcf.
“Pricing of hydrocarbon is a complex issue; one has to consider a lot of things. Obviously, $ 10 per mcf is pricey, but you have to look at the net pricing, considering the free gas that Bangladesh will get from the offshore exploration by IOCs. If the net pricing, after taking all the factors into account, comes down by around $ four to $ five per mcf, then I think it is all right,” he said. “We have no option, but to go for offshore exploration. For that, we have to depend on IOCs, since we don’t have the requisite expertise in offshore exploration,” he added.
Dr Badrul Imam, Professor of Petroleum Geology of Dhaka University said, exploring hydrocarbons in offshore areas, especially in the deep sea, is an expensive task.
“If the price of gas per mcf is above $ eight for the deep sea block, then it is all right, because there the exploration company needs to dig from 1,000 feet to 2,000 feet, which is a heavily capital-intensive task,” he said.
Giving the example of neighbouring Myanmar, Badrul Imam said, country has been buying gas from IOCs for its deep sea blocks at USD eight per mcf. “It is a competitive field; the IOCs will obviously look for other options if the opportunities here are not lucrative for them,” he added.
