Idle Indian co's twice-extended tenure nears expiry

Indian company ONGC Videsh Ltd (OVL) awaits interim government's decision on a third extension of its contract for hydrocarbon exploration in two Bangladeshi offshore hydrocarbon blocks, said sources, virtually wasting its tenure.

The OVL's twice-extended contract tenure for exploring shallow water offshore blocks SS-04 and SS-09 is set to meet its end on February 16, if the tenure is not extended anymore.

It's the sole international contractor assigned so far to delineate hydrocarbons in Bangladesh's offshore blocks in the Bay of Bengal, but it proved to be a do-nothing explorer.

Now the company has sought its contract tenure to be extended for three more years until February 2028, a senior official of energy and mineral resources division under the Ministry of Power, Energy and Mineral Resources (MPEMR) told The Financial Express on Sunday.

"Also, it seeks relocation of its two shallow sea blocks to more promising areas in the bay waters and an increase in gas prices," the official said.

State-run Petrobangla has never increased tariffs after signing production-sharing contracts (PSCs) or allowed block relocation either.

Meanwhile, the interim government did not find any bid submitted by international oil companies (IOCs) to explore the country's untapped offshore blocks in the recently concluded offshore bidding round, in a major go-by from the foreign investors.

Energy and Mineral Resources Division officials have said OVL has halted its well-drilling activities nearly over the past three years, in violation of contractual obligations.

"After a failed exploration attempt at Kanchan under the SS-04 block in Moheshkhali Island several years back, the Indian company didn't proceed with its exploration works," says a senior Petrobangla official.

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

Under the PSC with OVL, the oil-and gas-exploration company has contractual obligations to drill two more wells: 'Titly' in block SS-04 and 'Moitree' in block SS-09. But OVL management has yet to engage a contractor for the well drilling.

With only a couple of weeks remaining in its PSC tenure, the Indian firm can unlikely be able to complete drilling within the given time, said sources.

They added that the firm has a budget of US$65 million for drilling the wells.

Officials said OVL signed two PSCs with Petrobangla in February 2014, securing rights to explore shallow sea blocks SS-04 and SS-09. These contracts were initially set to expire in February 2019.

The state corporation extended the PSC tenure twice in hope of boosting offshore exploration -- first until February 2023 and then to February 2025. Both extensions were granted at OVL's request following failed exploration attempts.

In Kanchan gas well, OVL drilled beyond its targeted depth of around 4,228 metres in search of a commercially viable gas deposit. But all its efforts found only huge deposits of clay and shell-stone sequence and no sandstone, meaning there is 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.

The Indian company is the operator of blocks SS-04 and SS-09 with a participating stake of 45 per cent. 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 firm is 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 has 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 OVL owners will be allowed to operate and sell oil and gas for 20 years from an oil field and 25 years from a gas field under the deals. The company has already completed around 3,100 line-km 2D seismic surveys for both blocks.

Currently, the country has no producing offshore gas wells, despite having potential reserves of hydrocarbons in the bay, and its entire natural gas output comes from onshore fields and expensive liquefied natural gas (LNG) imports.

Azizjst@yahoo.com