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Bangladesh has apparently failed to make major breakthrough in offshore gas exploration so far after settlement of maritime boundary disputes with Myanmar in March 2012 and with India in July 2014. The country could only award four offshore blocks out of a total of 22 till date.
Among the four awarded offshore blocks, the shallow blocks SS-11, SS-04, SS-09 were awarded in 2014 bidding round, while the only deep sea block DS-12 was awarded in 2017 under a special initiative. Indian joint venture company ONGC Videsh-Oil obtained the shallow blocks SS-04 and SS-09 while Santos-Kris Energy JV got the block SS-11.
The only deep sea block was awarded to South Korean Posco-Daewoo Corporation last year. Compared to this, Myanmar has already awarded 26 blocks in its maritime boundaries.
After settlement of the disputes with neighbouring Myanmar and India, Bangladesh's total number of gas blocks stood at 48. Of these, there are 22 onshore blocks and 26 offshore blocks. Of these offshore blocks, 11 are shallow blocks while remaining 15 are deep sea blocks.
The authorities are now busy with the import of Liquefied natural gas (LNG)s to meet its demand in last few years. Since there was a big time gap between the last round of bidding in 2014 and now, the country is now mulling inviting international tender next year.
The Prime Minister's energy advisor has, of late, announced the government's plan for inviting international bidding for the offshore blocks. In the new round of bidding, according to reports, gas price will remain at $5 per thousand cubic feet (mcf) for shallow water blocks and $6.5 per mcf for deep sea blocks. There will be no provision for allowing gas export for the companies winning the shallow offshore gas blocks while only provision for export will remain there for deep sea blocks.
In this context, the contractor will be allowed to export its portion of gas share. But before export, it has to offer first to the Petrobangla. If the Petrobangla is unable to buy the gas, then it will offer to any local company to buy it. If there is no local buyer, then the company will be allowed to export its own share of gas.
There is no denying that the country is now heavily dependent on onshore fields for gas output, with production hovering around 2,700 Million Cubic Feet per Day (mmfcd) against a demand for over 3,300mmfcd. To meet the growing energy demand and depleting onshore energy reserve, the country has, of late, given focus on exploring oil and gas in the Bay of Bengal.
At the Bay, Bangladesh has 11 blocks for exploration at the India and Myanmar border. Among these, six prospective blocks are at Myanmar border. However, out of these six blocks, only one block was awarded to South Korean Posco Daewoo International Corporation.
Under its assignment, Daewoo is expected to invest $60-120 million from 2018-2021 to conduct 2D and 3D seismic surveys in the block 12. As a continuing process, the government intended to award the next offshore blocks and its multi-client seismic surveys in 2018. But much to the energy experts' dismay, the Energy Division recently cancelled the decision to conduct the non-exclusive 2D multi-client survey for unexplained reasons.
The government is now reportedly updating the Model Production Sharing Contract (PSC) to invite a new round of international bidding for oil and gas exploration in the country's offshore blocks. Some changes are being made to the provision to make the offer more attractive for the international oil companies.
One of the major changes is reduction of the mandatory seismic survey period to three years from the existing five years and giving option to the contractor to decide whether it would move further for exploration work. Under the existing Model PSC, a contractor is given five years' time where it has to conduct survey and also drill a well as part of the assignment.
But in the new Model PSC, the contractor will initially conduct a seismic survey within three years and complete the data analysis and then inform the government whether it wants to move further with its plant or leave the country. If the contractor finds the gas block potential and decides to stay in the contract, then it has to inform the government and also conduct drilling within next two years.
The country has reportedly amended its Model PSC 2012 keeping it in line with those in Myanmar and other countries in order to woo more international companies to explore its vast waters. This has been done as global oil giants were not keen on investing in projects that would not offer attractive incentives against the investment risk they would be taking.
The worldwide average cost of drilling a deepwater well is $100 million and can take several months to complete. Drilling rigs can cost as much as $1.0 million per day. Deepwater developments require large reserves, and the total number of wells needs to be kept small in order to make the project economically viable. The drilling cost component can be more than 50 per cent of the total capital expenditure. Hence, companies always try to ensure a very high gas production rate per well.
Bangladesh started facing natural gas crisis in 2009 with rapid industrialisation forcing Petrobangla to ration natural gas supplies to gas-guzzling industries, power plants, compressed natural gas (CNG) filling stations and households. Crisis in the gas sector had actually originated from the practice of giving illegal connections from the very beginning by an unscrupulous section of officials and employees of gas distribution companies.
The Bay of Bengal remains the least explored area for gas potential so far. The western part (India) and the eastern part (Myanmar) of the Bay have discovered significant natural gas reserves in the past decade. Geological studies and interpretations suggest that Bangladesh can have significant gas resources in the onshore and offshore belts which are yet to be discovered.
The seabed of Bay of Bengal is home to a rich core of solidified natural gas known as 'Diamond' or 'gas hydrates.' However, Bangladesh is yet to use the right kind of technology to extract the much sought after petroleum at such a depth.
In the circumstances, the country has to go all-out to harness the potential of the natural resources of the sea through applying latest technological know-how which is now a dire necessity for the country.