As many as eight foreign consulting firms with experience of having worked and brokered deals in the oil and gas industry, are interested to bag a role advising Petrobangla and its need to amend its Model Production Sharing Contract (PSC) if it really wants to attract the international oil companies to the country’s offshore gas blocks.
According to official sources, five of the eight firms which submitted their respective Expressions of Interest (EOI) to Petrobangla are from the United Kingdom while one each is from India, Singapore, and the United Arab Emirates (UAE).
They said Petrobangla received their proposals on November 21, the deadline of submission of the EOI, reports UNB.
“Now we will scrutinise their proposals to pick one of them to do the job,” said Shahnewaz Parvez, General Manager (Contract) of Petrobangla.
He said the consultant will mainly help the state-owned hydrocarbon corporation further amend the Model PSC 2019, in order to attract international oil companies (IOCs) amid the volatile international fuel market.
He noted that the principal upstream energy body will appoint an experienced foreign consultant to draw up the amendments that would convince the IOCs to invest in Bangladesh’s offshore gas fields.
Official sources said the recent excessive hike in petroleum fuel, especially that of the liquefied natural gas (LNG) has prompted the government to go for further amending the existing PSC, to attract the IOCs to invest in Bangladesh’s offshore gas blocks.
The country has a total of 48 blocks of which 26 are located in offshore areas and 22 onshore. Of the 26 offshore blocks, 11 are located in shallow sea (SS) water while 15 are located in deep-sea (DS) water areas.
Of these, 24 offshore gas blocks remain open for IOCs while two blocks —SS-04 and SS-09—are under contract with a joint venture of ONGC Videsh Ltd and Oil India Ltd where drilling works have recently started.
The government had last amended the Model PSC in mid-2019, whereby the price of gas for any participating IOC, that is, the price at which they would sell the gas to the government, was raised to $5.5 per thousand cubic feet (MCF) for shallow water blocks, and $7.25 per MCF for gas extracted from its deep-sea blocks.
There was a target to invite international bidding in March 2020 for exploration in offshore areas, but that got postponed due to the coronavirus pandemic that emerged at exactly the same time.
“The recent upward trend in oil and gas price has pushed the policymakers to further raise the gas price by introducing much more flexibility and incentives including keeping the export option open in the PSC,” said another Petrobangla official.
He dropped an indication that gas price might be increased up to $7.25 per MCF for shallow sea blocks while $8.5 per MCF for deep-sea blocks considering the upward global trend in petroleum price.
He mentioned that the government had to import LNG at $36 per MMBtu while it was just below $10 early this year. You quickly get the sense that the international
Recently, the World Bank in its outlook for the year ahead predicted that the petroleum price may not fall until the end of 2022 although recently the price declined by $10.
Under a Model PSC, normally, if any IOC discovers gas, it gets 40 per cent stake while the government obtains the remaining 60 per cent.
The government also buys the IOC’s gas at a certain price. So, if gas price is raised, IOCs feel encouraged to invest in exploration works, said the Petrobangla officials.
They said this is the first time, at least a 15-year experienced foreign firm will be hired to help the government to prepare the amendments in the PSC as foreign companies can give best suggestions as to which kind of incentives be offered to attract IOCs.
Officials said the Energy Division had instructed Petrobangla to hire such a consultant in February this year. But negligence of some top officials delayed the work.
They said Petrobangla now plans to complete the appointment of consultants within the next two months and receive their report by April next year. It hopes to complete the amendments by May and invite international bidding for IOCs in June next year in order to start exploration works before the end of 2022.
Officials said that the foreign contractor, which was awarded a contract to conduct a multi-client seismic survey in the offshore sea blocks, also suggested updating the Model PSC to attract IOCs in the changed scenario in the global petroleum market.
Bangladesh’s offshore area remained unexplored despite the settlement of its dispute with neighbouring Myanmar and India over the maritime boundary almost eight years ago.
It has had no success in the exploration of oil and gas in its offshore areas located within its maritime boundary, said an energy expert wishing not to be named.