ME crisis: Govt moves to launch bid rounds for onshore, offshore hydrocarbon blocks

The new government has moved to launch bid rounds offering both onshore and offshore blocks to international oil companies (IOCs) to ensure the country's future energy security through delineating new hydrocarbon reserve against the backdrop of the escalating Middle East crisis.

"We are now working to announce the bid rounds as part of the government's 180-day programme," Energy and Mineral Resources Division (EMRD) Secretary Mohammad Saiful Islam told The Financial Express on Sunday.

Of the 47 blocks planned for offer, 21 lie in onshore areas and 26 in offshore ones, he said.

State-run Petrobangla has already sweetened further the drafts of the model production sharing contract (MPSC) to lure the IOCs in the forthcoming bid rounds, Petrobangla Chairman Md Arafanul Hoque told the FE.

He said the mandatory portion to workers' profit participation fund (WPPF) had been reduced to 1.5 per cent from the previous 5.0 per cent.

Besides, decision had been made over easing responsibility on the construction of hydrocarbon pipeline after discovery and subsequent operations, he said.

A fresh bid round for the offshore oil and gas exploration would be launched immediately after obtaining the nod from the energy ministry, said the Petrobangla official.

Sources said not a single IOC took part during the latest offshore bidding although half a dozen IOCs purchased bid documents.

Meanwhile, no bid round was offered for onshore blocks over the past 29 years.

The lack of confidence from the IOCs coupled with inadequate data on offshore blocks resulted in the non-response in the offshore bidding, market insiders said.

Petrobangla had put the offer on board for nine months after floating the international tender on March 10, 2024.

Twenty-four offshore blocks - 15 in deep sea and nine in shallow sea - were on offer for exploration lease.

The 15 deep-sea blocks on offer are DS-08, DS-09, DS-10, DS-11, DS-12, DS-13, DS-14, DS-15, DS-16, DS-17, DS-18, DS-19, DS-20, DS-21, and DS-22.

The nine shallow-water blocks are SS-01, SS-02, SS-03, SS-05, SS-06, SS-07, SS-08, SS-10, and SS-11.

The gas prices for the offered blocks were tagged to the price of Brent crude on the international market during the previous year's bid so that the gas price becomes flexible in line with the movement of global oil price indices.

The gas price was offered at 10 per cent of Brent Crude, meaning if the Brent crude is traded at $100 per barrel, the gas price would be $10 per million British thermal unit (MMBTu).

The pricing modalities were fixed the same for both shallow and deep-water blocks.

Petrobangla will purchase the explored IOC gas at the Brent crude-linked rate, which will have no capping.

Capping-free price means Bangladesh will have to purchase the gas, to be extracted by the contractors, at a rate as high as it goes or as low as it slips.

The foreign firms also had the liberty to export natural gas after meeting domestic demand following Petrobangla's first right of refusal.

They were offered the facility to repatriate full profit, too.

There was the provision for assignment of interest and share-transfer and 100 per cent cost recovery with an annual cap of 75 per cent.

Contractor must have to have a mandatory work programme consisting of a 2D seismic survey and the mandatory purchase of available 2D multi-client seismic data to get relief from mandatory work obligations proportionately.

Over the last decade, Bangladesh had launched only one bidding round in 2017, and that was only for three deep-water blocks, according to Petrobangla data.

Although Posco-Daewoo was awarded one deep-water block - DS-12 - after the bidding, the South Korean oil and gas exploration company left the block in 2020 after carrying out a 2D seismic survey.

Previously, Petrobangla had floated a bidding round in 2012, through which three shallow-water blocks and one deep-water block were awarded to contractors.

For onshore blocks, Petrobangla has prepared the MPSC offering gas price linking to 8.0 per cent of the dated Brent crude with a capping in the Brent crude price, said sources.

If fixed under this market-based pricing formula, the new gas price for onshore blocks will be nearly three-times at around $8.0 per MMBTu considering Brent crude at US$100 per barrel, which is the highest current price offered under the existing model PSCs for onshore gas blocks.

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

The price of LNG currently being imported from long-term suppliers - Qatar Energy and OQ Trading International - ranges from $12.50 per MMBTu to $13.50 per MMBTu, said sources.

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

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

Singapore's KrisEnergy is producing natural gas from the Bangura field under Block 9.

ONGC Videsh and Oil India are jointly exploring shallow-water blocks SS-04 and SS-09.

azizjst@yahoo.com