State-owned oil, gas and mineral corporation Petrobangla has surrendered the country’s interest to international oil companies (IOCs) by giving proposal to Daewoo International Corporation for exporting gas to third country from deep sea gas exploration, experts alleged.
Following strong lobbing of IOCs, the Petrobangla has restated the option recently in Product Sharing Contract (PSC) after cancellation of gas export provision four year ago.
Meanwhile, the government has finalized to award deep sea gas block no 12 in the Bay of Bengal to Korean Daewoo for exploring gas though negotiation bypassing competitive tender under the Speedy Supply of Power and Energy (Special Provision) Act, 2010.
The National Committee to Protect Oil, Gas, Mineral Resources, Power and Ports has termed the government decision suicidal and said doing so under the special act would be an offence.
“There is a huge crisis of gas in the country, yet the government is allowing the provision of gas export by the companies who would extract it. It contradicts with the government’s stand,” Prof Anu Muhammad, member secretary of the committee, said yesterday.
Energy expert of Consumers Association of Bangladesh (CAB) Professor Shamsul Alam said, in future Petrobangla officials have to take responsibility for their irresponsibility of the country’s interest in the international deal.
“If any IOC got the opportunity of exporting gas to third country, every one in the next will demand similar facility, which may create energy crisis at home,” Professor Alam said.
According to the amended model PSC of 2012, the prices of gas produced by IOCs from deep sea gas fields will increase by 2 per cent annually. In addition, the IOCs have been exempted from paying the transportation tariff of 4 per cent for using Petrobangla’s transmission lines.
The exploration companies will also enjoy exemption from paying the corporate tax. The amendment also includes the provision of increasing the price and share of gas for IOCs, a higher cost recovery limit, and corporate tax payment by Petrobangla.
According to the amendment, an IOC will sell around 50 per cent of the produced gas to Petrobangla at $6.50 per 1,000 cubic feet.
Following that, the IOC can offer Petrobangla to buy the rest of the gas according to its own terms and conditions. But if Petrobangla refuses to buy the rest of the gas, the IOC will be allowed to sell the gas to a third party inside Bangladesh.
Now, if the IOC is unable to strike a deal with local companies as well, it can export its share of gas to foreign buyers as liquefied natural gas (LNG).
“We’ve completed negotiation and sent our proposal to the Energy Division to place it to the Cabinet Economic Affair Committee,” said Petrobangla chairman Ishtiak Ahmed.
He informed that the state-owned hydrocarbon corporation has completed the negotiation with the Korean company with reduced timeframe for exploration.
“Only Daewoo responded just one block DS-12, No proposal was found for any other blocks from any company,” he said.
Currently, three foreign companies – Chevron, Santos and Kris Energy – are working at onshore and shallow sea blocks in the country following international biddings in 1993 and 1997.
However, Prof. Mohammad Tamim of the department of petroleum and mineral resources at BUET has favour of the government decision.
“In case there is a huge production of gas – like 20-30 trillion cubic feet – Bangladesh will not need this much gas at once. What will the government do with the excess gas then? Companies in the private sector will not be able to use the gas either,” he said.
“If the government is unwilling to keep the provision, it can cancel it, but then Petrobangla will have to buy all the gas explored by the IOCs. No third parties – local or foreign – should be allowed to buy the gas then.”
In January 2014, US-based oil company ConocoPhillips and Norway-based Statoil jointly submitted bidding documents to explore oil and natural gas in three deep sea gas blocks – DS 12, DS 16 and DS 21 – under the amended model PSC of 2012.
ConocoPhillips and Statoil negotiated with the government for exploring the blocks, but later ConocoPhillips withdrew their proposal, demanding export benefits and increased gas price. To date, negotiation with Statoil remains unsettled as well.
