Hydrocarbon hunt: ExxonMobil in talks with govt to explore all deepwater blocks

US oil super-major ExxonMobil is agog to explore Bangladesh's deep-water hydrocarbon blocks under revised terms in the proposed model production- sharing contract (PSC), said sources, amid urgent need for fuels in the country.

The firm is in talks with government high-ups and top officials of state-run Petrobangla to get exploration rights over all the 15 deep-water blocks situated in the Bay of Bengal.

If awarded, it will be a big deal for Bangladesh as ExxonMobil will have to invest at least around US$3.0 billion during the initial exploration period of around five years to delineate new reserves over the first five years of its hunt.

The US company's investment will increase significantly if 'commercially viable' hydrocarbons could be discovered in the deepwater blocks in Bangladesh, market- insiders said.

"ExxonMobil has shown interest in carrying out oil and gas exploration in Bangladesh's deepwater blocks," Petrobangla chairman Zanendra Nath Sarker told the FE Tuesday.

The government has yet to decide on its proposal, says the top brass at Bangladesh's oil, gas and petroleum corporation.

Deepwater exploration in the country turned a big 'zero' following the exit of South Korean Posco International from block DS-12 in 2020.

Before packing their bags, Posco authorities had sought an extension of its production-sharing contract (PSC) with higher 'commercial terms', but Petrobangla refused to amend the deal.

The Posco-Daewoo Corporation, a joint venture of the two Korean firms, had inked the PSC in December 2016 with the Petrobangla under the Speedy Supply of Power and Energy (Special Provisions) Act 2010 that empowers the government to bypass tendering process in energy deal-making.

Posco later acquired Daewoo interests to become lone stakeholder of the deep-sea block DS-12.

Under the PSC, the South Korean company was entitled to get natural gas price at around US$6.50 per million British thermal units (MMBTU) with a 2.0- percent annual price escalation from the date of first gas production.

Posco carried out 2D or two-dimensional seismic survey in around 3,580-kilometre area, double its committed area for the survey, before exit.

The company could detect around half a dozen potential spots having hydrocarbon reserves through the 2D survey, it claimed.

Petrobangla had earlier awarded the DS-12 block along with two other deepwater blocks--DS-16 and DS-21--to a joint venture of ConocoPhillips of the United Sates and Norwegian Statoil under the previous 2012 bidding round.

But both backed out from inking a PSC on 'poor fiscal terms' in the model contract.

Previously, ConocoPhillips relinquished operations from two separate deepwater blocks-- DS-08-10 and DS-08 -11 -- on December 15, 2014 after carrying out 2D seismic surveys because of 'poor' fiscal terms. It had inked PSCs for carrying out oil-and gas-exploration activities in these two deepwater blocks in June 2011.

ConocoPhillips in 2013 also had shied away from signing a deal for shallow-water block SS-07 again as the fiscal terms were deemed not supportive.

Seeing all oil and gas majors leaving Bangladesh's exploration job even after entering into PSCs, Bangladesh is set to offer international oil companies (IOCs) an enhanced output share and excess gas-export facility in a package of bigger bets in a new model contract, as domestic fuel exploration is deemed urgent to cut dependence on costly fuel imports amid prolonged dollar dearth worldwide.

The latest model PSC for deal-making with international oil companies is already drafted with increased bets to attract foreign explorers, at a time when the government is struggling to import expensive liquefied natural gas (LNG) from global spot market and clear dues to infield gas-producer Chevron Bangladesh.

Petrobangla will purchase natural gas from future overseas exploration contractors at around three times the current price as it is hiking the price linking same benchmark used to buy expensive LNG without capping, said sources.

The foreign companies to be operational in future offshore exploration jobs will also have the liberty to export natural gas after meeting domestic demand.

Under the proposed pricing formula, the corporation's offered buying price to IOCs will be around US$10 per MMBTU, above three times the current purchasing price below US$3.0 per Mcf. Currently, Brent crude price on the international market is US$85 per barrel.

In the drafted model PSC for the next bidding round Petrobangla has proposed to reduce government share in 'profit gas' to 40 per cent to 70 per cent from previous contact's 55 per cent to 80 per cent.

Profit gas means the available gas after the quantity corresponding to the value required for royalty payments and the investor has taken the cost gas under the PSC terms.

Currently, Bangladesh's LNG-import price under long-term contracts with Qatargas and Oman Trading International is around US$10.50 per MMBtu.

"Given the current global condition, the government can offer ExxonMobil the deepwater blocks tagging a time-bound condition to explore the blocks," energy expert Prof Badrul Imam told the FE Tuesday.

The important thing is "you have to get the gas out," he stressed.

Non-engagement of the deep-sea offshore blocks even after around a decade of settling the maritime dispute with Myanmar and eight years of settling dispute with India is unfortunate, says energy-expert Dr M Tamim.

"We lost the opportunity to award deep-sea blocks to potential global contractors around a decade back when we initiated the process of importing LNG," he notes, in tune with criticisms by other economists and experts regarding the switch that ultimately leads to repeated hike in fuel-tariff rates.

He thinks that if Petrobangla could carry out the necessary non-exclusive seismic survey in offshore blocks, the oil-and gas-exploration companies could have been interested.

Sources say ExxonMobil is the world's number-one deepwater hydrocarbon explorer having extensive investments in Canada, Brazil, Angola, Guyana and many other prospective areas across the globe. Currently, four IOCs have active PSCs, either individually or under joint venture, to explore three shallow-water blocks in Bangladesh.

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

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