The imperative of offshore oil and gas exploration

Rezaul Kabir | Published: January 26, 2019 21:14:15 | Updated: January 31, 2019 20:20:38

Energy drives the engine for economic development of a country. Domestically sourced energy reduces the dependence on very costly energy import draining the foreign currency reserve. This is specially true for Bangladesh spending a big portion of the national budget to meet its energy need.

In Bangladesh, the main energy sources are natural gas, imported crude oil, liquified natural gas (LNG) and coal. Other minor energy sources are renewable energy like solar, wind and hydropower. Natural gas is managed fully from domestic sources while need for coal is partly met from within the country. It is generally used for electricity generation, household need, fertiliser production and some other industrial needs. The LNG is mostly used as fuel for vehicles and to meet household need and minor industrial need.

Bangladesh has a limited known reserve of energy sources which will not last long. The  domestic consumption of natural gas is huge,  and growing exponentially every few years. So, there is a critical need to find new reserve to reduce dependency on very costly energy import.

Bangladesh needs to search for oil and gas in deep offshore areas of the Bay of Bengal. The country has very limited known onshore hydrocarbon fields and the dense population distribution and spread of built up areas make onshore hydrocarbon search a difficult process. Still, the record of onshore hydrocarbon search effort is quite satisfactory.

Following are some reasons why the country needs to go for hydrocarbon exploration in the deep sea-- within the vast economic zone of the Bay of Bengal.

GEOPOLITICAL CONCERNS: Geopolitical concerns make the world more unpredictable than ever before. Geopolitical issues could make international oil market more volatile. Among the issues are political instability in Iraq, Libya and Nigeria, new sanctions on Iran, current political situation in Saudi Arabia, blocade of Qatar, political chaos in Venezuela.  Bangladesh sees the start of a new cold war involving the big powers which is mostly economic market driven (energy sources included) than ideological considerations. Such issues in major hydrocarbon producing countries and international relations may have an effect on international oil and gas supply chain and their prices.

SAND RESERVOIR WELLS: Oil production from shale fracking wells is not satisfactory. It is not efficient. Oil produced from shale fracking yields 20-30 per cent less than the predicted production profile. This ultimately increases the production cost of shale fracking oils and may make this higher than the production cost for normal (sand) reservoir wells. International oil companies are now turning back to invest in deep sea for sand reservoir wells.

INCREASE IN GAS CONSUMPTION: Natural gas consumption is rising and gas sector is growing three times faster than oil. Low domestic gas prices all over the world are driving the use of gas based  power generation. Also, major environmental pollution concerning coal-fired power plants are causing many countries to abandon coal in favour of gas and renewable energy. All these will contribute to increase in gas consumption and price hike as the gas sources are not finite.

LNG CONVERSION: As natural gas consumption increases, it will drive the need for the movement and conversion of LNG. The LNG market is expanding very rapidly all over the world. It is already evident in the phenomenal demand of the Qatari LNG - the largest producer/marketer of the LNG in the world. International energy sectors are now making strategic move on investment in offshore gas exploration and LNG conversion.

CONCLUSION: As Bangladesh is now becoming a fast growing medium income country, it needs to shift to a high gear for immediate offshore hydrocarbon exploration. This is to meet its growing need for sustainable development and to reduce the drain on national budget for very expensive energy import. Deep sea drilling operation is expensive but now the drilling cost is almost half than the cost in the past. For a quick turn over, international tender may be invited for offshore hydrocarbon exploration in the Bay of Bengal.

Myanmar, Thailand and Malaysia have made major discoveries of oil and gas in the deep sea. In fact, both Myanmar and India are looking for prospecting the Bay of Bengal for hydrocarbon. Bangladesh should take the edge and start exploration soon, for both strategic and huge economic reasons.

Rezaul Kabir is an international oil and gas exploration specialist.

Share if you like