Accelerating hydrocarbon exploration

Good news is that Bangladesh is getting fresh natural gas supply from two newly drilled onshore wells. Some 40 million cubic feet per day (mmcfd) of natural gas is being produced from these two wells -- Titas-25 and Titas-26. Gas supply from these wells has begun after China's Sinopec International Petroleum Service Corporation had successfully completed drilling of four onshore gas wells in the state-owned Titas field under a project funded mostly by the Asian Development Bank (ADB). 
Natural gas production from two other wells -- Titas-23 and Titas-24 -- will be initiated soon after laying pipeline and completing other necessary works. 
All the four onshore gas wells drilled by Sinopec are owned by the Bangladesh Gash Field Company Limited (BGFCL) and located in the Brahmanbaria
district. 
Titas is Bangladesh's second largest gas-producing field after the Chevron-operated Bibiyana field. Titas is currently producing around 539 mmcfd of natural gas from 24 wells against an overall production capacity of 518 mmcfd. Sinopec was awarded the drilling project after a competitive bidding where Russian oil and gas major Gazprom was the only other bidder.
In another development, South Korea's Posco Daewoo Corporation is likely to invest around US$112 million to conduct maiden hydrocarbon (HC) exploration in a deep-sea block - DS-12 - in the Bay of Bengal under a deal signed last week. The firm's President and the Chief Executive Officer (CEO) unveiled the provisional investment plan after signing the deal on the block.
Under the plan, around $3.0-5.0 million is scheduled to be invested in carrying out 1800-line-kilometre (LKM) 2D (two-dimensional) seismic survey within two years. An additional $5.0-7.0 million will be invested in the third year of exploration when Daewoo commits to carry out three dimensional (3D) seismic survey in a 1,000-square-kilometre area. During the fourth and five years, the Korean firm is expected to invest around $50-100 million in drilling at least one exploration in the said block.
In fact, high optimism was aired following the discovery of new hydrocarbon in the Bangladesh's deep-sea block DS-12, which is located adjacent to Myanmar's AD-7 offshore block where the Korean firm is the also the operator. DS-12 and AD-7 are located in similar sediment and geological structure in the Bay of Bengal.
Currently, no oil- and gas-exploration activities are being carried out in Bangladesh's deep offshore hydrocarbon turfs, much to the dismay of the concerned citizens.
Daewoo signed the PSC under the Speedy Supply of Power and Energy (Special Provisions) Act 2010, which facilitates awarding contracts avoiding tenders and indemnifies officials concerned against prosecution for making decisions. The law opened up the way for reaching consensus through negotiations. Petrobangla had inked all the previous PSCs with IOCs under open tendering.
As per the PSC, Daewoo will bear all the exploration costs. Recovery of the costs is subject to discovery of hydrocarbons, which will bve 70 per cent in maximum per year of available petroleum. No cost recovery of expenses and provision of compensation due to contractors' negligence are there in the deal.
If hydrocarbon is discovered, Petrobangla will share profit at the range of minimum 65 per cent and maximum 90 per cent for oil or condensate and minimum 60 per cent and maximum 85 per cent for natural gas. The price of gas has been pegged to high-sulfur fuel-oil (HSFO) prices and the floor price for HSFO has been fixed at US$100 per tonne and the ceiling price at $200 per tonne. The price will be hiked by 2.0 per cent per annum with 130 per cent of the market price from the date of commercial production.
Bangladesh is currently dependent on onshore fields for gas output, with production hovering around 2,700 mmcfds against a demand for over 3,300 mmcfd. The shortfall has resulted in the rationing of the fuel to industries, power plants and fertiliser factories and the suspension of new piped gas connections to commercial and household consumers.
The country has been facing critical gas supply situation for the last two years due to its discouraging performance about exploration, exploitation and extraction of gas from its 'hidden' reserve. The recent discovery of huge gas reserves by India and Myanmar in the Bay near Bangladesh's economic zone is clearly an eye-opener to go all-out for deep-sea exploration.
In fact, a number of international oil companies (IOCs) had earlier written to the energy ministry with a request to carry out a seismic survey in the Bay of Bengal, prior to floating tender. They had also recommended splitting the country's offshore sea territory into a number of small gas blocks to accommodate an increased number of IOCs in offshore hydrocarbon exploration. The government remained conspicuously silent on the issue.
The country urgently needs massive investments from international oil and gas companies, given the financial and technological constraints of its own state-run firms. Investment worth over $30 billion is needed to tap the gas potential in the Bangladesh part of the Bay of Bengal. 
Extensive exploration drive should immediately start on both the country's onshore and offshore blocks in the wake of soaring gas crunch, caused mainly by lack of drilling in prospective fields. Harnessing gas along with power is of crucial importance at this critical time of a huge energy crunch.
In the circumstances, the government needs to adopt an integrated policy framework involving the private sector for accelerating drilling activities both in onshore and offshore fields. The country should also develop expertise and adequate skilled manpower for carrying out exploration work in both the fields to be self-sufficient in energy sector.

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