Energy ministry assessing model PSC for onshore blocks

The energy ministry is currently evaluating a draft Model Production Sharing Contract (MPSC) to launch an onshore bidding round after 28 years.

State-run Petrobangla has already prepared the draft and submitted it to the Energy and Mineral Resources Division (EMRD) under the Ministry of Power, Energy and Mineral Resources (MPEMR) for approval, Petrobangla Chairman Md Rezanur Rahman told The Financial Express Wednesday (June 4).

He said the terms of the MPSC have been made attractive to potential international oil companies (IOCs) in line with the recommendations of global leading consultant Wood Mackenzie.

Mr Rahman disclosed neither the number of blocks to be offered for exploration by the IOCs nor the prices.

Sources said Petrobangla has moved to launch the onshore bidding round after nearly three decades to expedite hydrocarbon exploration in onshore areas, especially in hilly ones, to help meet the country's mounting natural gas demand in industries, power plants, and other gas-guzzling entities.

Under the MPSC, the gas purchase price is linked with the dated Brent on a three-month rolling average basis.

The MPSC terms of the previous 1997 onshore bidding round were linked to high sulphur fuel oil (HSFO) with a price floor and a ceiling.

"We are working on fixing the new formula so that the price could be linked to around 8.0 per cent of the dated Brent crude with a capping in the Brent crude price," said another Petrobangla official.

Based on the current Brent price assumption, gas price is anticipated to be in the range of around $5.0 per million British thermal units (MMBtu).

This would bring gas prices more in line with the costs of supplying gas from liquefied natural gas (LNG) imports, which Bangladesh is projected to increasingly rely on, should the country fail to make a turnaround in its domestic gas production.

If fixed under this market-based pricing formula, the new gas price for onshore blocks will be nearly double the highest current price offered under the existing MPSCs for onshore gas blocks.

The US-based Chevron is getting around $2.76 per MMBTu against its gas sales to Petrobangla, while Singapore's KrisEnergy receives around $2.31 per MMBTu under the current gas pricing formula linked to HSFO.

Petrobangla also purchases natural gas from three of its subsidiary state-owned companies.

It purchases gas from state-run Sylhet Gas Fields Ltd (SGFL) and Bangladesh Gas Fields Company Ltd (BGFCL) at Tk 28 per Mcf (1,000 cubic feet) and from state-run Bangladesh Petroleum Exploration and Production Company Ltd (BAPEX) at Tk 112 per Mcf.

The price of LNG imported from long-term contract suppliers - Qatar Energy and OQ Trading International - was $10.66 per MMBTu and $10.09 per MMBTu, respectively, until the first seven months of the current fiscal year.

Petrobangla is also working on narrowing down the differences in exploration benefits to attract the IOCs to take part in the next onshore bidding round.

It floated the last bidding round for 24 offshore blocks last year under the MPSC 2023 with no response from the IOCs.

Under the MPSC 2023, gas was priced at 10 per cent of the dated Brent on a three-month rolling average basis. Based on the current Brent price assumption, the gas price would be in the range of around $7.08 per MMBtu.

During Bangladesh's latest onshore bidding round in 1997, four onshore blocks - block-5, block-7, block-9, and block-10 - were awarded.

Currently, four IOCs have active PSCs, either individually or under joint venture, to explore three shallow-water blocks for offshore exploration.

Chevron is active in exploring and producing natural gas in three onshore gas fields under blocks 12, 13, and 14.

KrisEnergy is producing natural gas from the Bangora field under block 9.

ONGC Videsh Ltd (OVL) and Oil India Ltd (OIL) are jointly exploring shallow-water blocks SS-04 and SS-09.

Currently, Bangladesh imports lean LNG from RasGas of Qatar and Oman Trading International (OTI) of Oman under long-term contracts and from different suppliers under spot market terms to meet the mounting natural gas demand.

The country's overall gas output is around 2,883 mmcfd, including the re-gasified LNG, against the demand of over 4,000 mmcfd.

Azizjst@yahoo.com