India's OVL pulls out of deal

After failing to delineate any potential hydrocarbon reserve during its Bangladesh operations over the past decade, India's ONGC Videsh Ltd (OVL) has now decided to exit from its contract with the state-run Petrobangla to explore two shallow-water blocks in the Bay of Bengal.

The blocks are SS-04 and SS-09.

As OVL is pulling out of the contract, Bangladesh's offshore blocks have turned "idle" again in terms of hydrocarbon exploration.

"OVL informed us of its unwillingness to carry out further exploration in Bangladesh's two shallow-water blocks," Petrobangla Chairman Md Rezanur Rahman told The Financial Express Thursday.

The Indian oil-and-gas exploration company's decision to exit the blocks came despite extending the contract's tenure for the third time several months back.

Earlier in 2019, two international oil companies (IOCs) - South Korea's Posco International and Australia's Santos - exited from deep sea block DS-12 and shallow water block SS-11.

Petrobangla will now confiscate OVL's $66.20 million bank guarantee as the latter is exiting the shallow-water blocks without carrying out the minimum exploration as per the production sharing contract (PSC), sources familiar with the agreement said.

Over the past decade, OVL invested around $63 million in Bangladesh to discover oil and gas prospects in shallow water in offshore areas.

It pleaded to relocate its two shallow-sea blocks to more promising areas in the bay waters and increase gas prices during the contract period, but both the demands were turned down by Petrobangla.

Petrobangla never increased gas prices after signing PSCs with IOCs or allowed block relocation in favour of them.

OVL signed two PSCs with Petrobangla in February 2014, securing the rights to explore shallow-sea blocks SS-04 and SS-09.

The contracts were initially set to expire in February 2019.

After a failed exploration attempt at Kanchan under the SS-04 block on the Moheshkhali Island several years back, the Indian company did not proceed with the exploration, said a senior Petrobangla official.

OVL officials said they could not find any commercially viable hydrocarbon resources at Kanchan after drilling a well.

Under the PSC with OVL, the company has contractual obligations to drill two more wells - Titly in block SS-04 and Moitree in block SS-09.

But the OVL management did not engage any contractor to drill the wells.

In the Kanchan well, OVL drilled beyond its targeted depth of around 4,228 metres in search of a commercially viable gas deposit.

However, all its efforts found only huge deposits of clay and shell-stone sequence but no sandstone, meaning there was no gas reserve there.

The Kanchan well was up for the first offshore drilling in the country's extended maritime territory in the last eight years.

Block SS-04 covers an area of 7,269 square kilometres, while block SS-09 stretches over an area of 7,026 square kilometres.

The water depth of the two blocks ranges between 20 metres and 200 metres.

As per the PSC, the OVL was committed to conducting 2,700 line-kilometre 2D seismic data acquisition and processing as well as drilling one exploratory well in block SS-04.

Also, it had to do the same for another 2,700 line-km 2D seismic data acquisition and processing as well as drill two exploratory wells in block SS-09.

The company completed around 3,100 line-km 2D seismic surveys for both blocks.

Currently, Bangladesh has no producing offshore gas wells.

Its entire natural gas output comes from onshore fields and expensive liquefied natural gas (LNG) imports.

With the exit of the Indian company, Bangladesh's future energy security is set to become gloomy, said energy expert and Vice-Chancellor of Independent University Bangladesh Professor M Tamim.

"OVL was, however, almost inactive in the blocks and did not find anything encouraging in the country's shallow-water blocks," said Mr Tamim, who was a special assistant to the chief adviser of the previous caretaker government.

This also casts doubts on the country's shallow water prospects, he added.

Azizjst@yahoo.com