The Financial Express

Roadmap to quit BD: Santos plans to sell all stakes to KrisEnergy

| Updated: December 07, 2019 16:48:20

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The logo of Australian oil and gas producer Santos Ltd is pictured in Sydney on February 15, 2016 — Reuters/Files The logo of Australian oil and gas producer Santos Ltd is pictured in Sydney on February 15, 2016 — Reuters/Files

Australian oil and gas exploration company Santos has planned to wind up its Bangladesh operations after a decade-long involvement in the country's energy sector.

The relinquishment move of Santos came within one month of similar decision from another international oil company - South Korean Posco International.

Santos has intended to sell its entire stakes as well as the operatorship over offshore sea block SS-11 to its joint venture (JV) partner Singapore's KrisEnergy, a senior Petrobangla official said.

Its Magnama-2 well under block-16 will go to state-run Bangladesh Petroleum Exploration and Production Company Ltd (Bapex).

Posco has informed the Energy and Mineral Resources Division under the Ministry of Power, Energy and Mineral Resources about its intention to leave the deep sea block DS-12 unexplored, following its 'failure' to find out a buyer of its Bangladesh stakes.

The Australian company now has stakes in offshore sea block SS-11 under JV with KrisEnergy, having 45 per cent share each, while the remaining 10 per cent stake is owned by Bapex as carried over interest.

It also has 51 per cent stake of Magnama-2 well under block-16, while the remaining 49 per cent stake is owned by Bapex.

Santos initiated its Bangladesh operations in late 2010 by acquiring stakes of Scottish Cairn Energy's interests in the country.

Officials said Petrobangla recently reminded Santos and KrisEnergy of carrying out mandatory drilling programme as part of the JV's contractual obligation.

The JV's bank guarantee worth US$ 11 million might be confiscated, if it fails to carry out oil and gas exploration as per the production sharing contract (PSC), signed between Petrobangla and the JV.

The PSC, signed between the parties, got a two-year extension, and its tenure is now scheduled to expire in March 2021.

Santos and KrisEnergy inked the PSC to carry out hydrocarbon exploration in shallow-depth offshore sea block SS-11 in the Bay of Bengal on March 12, 2014, with a five-year exploration period, which expired on March 11, 2019.

The JV committed to drill an exploratory well and carry out 1,876 line kilometre (LKM) 2D (two-dimensional) seismic survey and 300 square kilometre (sq-km) 3D survey during the five-year contract period.

The JV carried out a 2D seismic survey in 3,220 LKM area in 2017 and identified prospects that wooed it to conduct a 3D seismic survey in around 305 sq-km areas to explore hydrocarbon in shallow water in the sea.

The mandatory drilling of an exploratory well, however, has not been completed yet.

Industry insiders said Santos was searching for a buyer of its Bangladesh assets like that of Posco International.

Santos drilled an exploration well in Magnama-2 under a JV partnership with Bapex in 2017, but 'failed' to discover a commercially viable hydrocarbon reserve. Magnama-2 structure is located near the offshore Sangu well.

Santos claimed to have delineated a semi-commercial discovery there, although it did not undertake any subsequent programme for further exploration.

Santos's predecessor - Cairn Energy - discovered natural gas prospects in Magnama, penetrated by a single exploration well, around a decade ago.

Cairn drilled the exploration well in Magnama in 2008, and subsequently carried out a 2D seismic survey in 213 LKM area in early 2010.

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