South Korean oil and gas firm Posco International has sought a review of the existing 'commercial term' of its contract with Petrobangla to continue hydrocarbon exploration in deep sea block in the Bay of Bengal.
It sent a letter to Petrobangla last week, seeking a favourable cost recovery provision in the production sharing contract (PSC) which will help the international oil company retrieve its investment early, a senior Petrobangla official told the FE on Sunday.
Earlier, Posco had informed Petrobangla as well as Energy and Mineral Resources Division under the Ministry of Power, Energy and Mineral Resources about its intention to relinquish deep sea block DS-12.
In its argument, the company wanted to justify its claim as investment in deep sea exploration is huge and constructing a deep sea pipeline is complex and expensive too.
Some 1.70 kilometres of depth will require to be drilled in the deep sea block to determine any hydrocarbon prospect and some US$2.0 billion will require for building an undersea pipeline to carry discovered gas to shore, it justified.
However, Petrobangla has not yet responded to the Posco's letter.
The Posco-Daewoo Corporation, a joint venture of Korean Posco and Daewoo, had inked the PSC with state-run Petrobangla in December 2016 under the Speedy Supply of Power and Energy (Special Provisions) Act 2010, bypassing tendering.
Posco later acquired Daewoo to become the lone stakeholder of the deep sea block DS-12.
Currently, no oil and gas exploration is being carried out in Bangladesh's deep offshore blocks excepting Posco.
Under the PSC, Posco would get natural gas price at around US$6.50 per mmBtu (million British thermal unit) with a 2.0 per cent annual price escalation from the date of first gas production.
Before relinquishment plan, Posco carried out two-dimensional (2D) seismic survey in around 3,580 kilometre areas, which are double its committed area for the survey.
The South Korean company could detect around half a dozen potential spots for having hydrocarbon reserves following the 2D survey, said a senior Petrobangla official.
Petrobangla had earlier awarded the DS-12 block along with two other deepwater blocks, DS-16 and DS-21, to a joint venture of US's ConocoPhillips and Norwegian Statoil under the previous 2012 bidding round.
Both ConocoPhillips and Statoil refused to ink PSC on 'poor fiscal terms' in the model contract.
DS-12 is located in depth ranging from 1,000-2,000 metres, having a size of 3,560 sq km.
Bangladesh is trying to promote the exploration in the Bay of Bengal to help meet its soaring energy demand.
The country's natural gas output is hovering around 3,140 mmcfd, some 557 mmcfd of it is regasified LNG. The entire local production comes from onshore gas fields.
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