The Financial Express

Drilling of offshore gas fields put on hold

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The government wants to further delay the launching of fresh bidding round to offer offshore blocks fearing a lukewarm response from the potential global players due to the coronavirus pandemic.

According to a report, state-run Petrobangla is expected to see the impact of the coronavirus pandemic on the global energy sector before launching the bidding round.

Global oil and gas exploration companies might not be interested to take part in the competitive bidding to carry out 'expensive' offshore exploration jobs during the current coronavirus pandemic.

Although oil and gas prices in the international market rebounded and were witnessing an upward trend, Petrobangla is not yet ready for launching the bidding round.

Shelving the exploration plan, however, means the country's dependence on imports of fuel especially expensive LNG, or liquefied natural gas, might increase.

Energy and Mineral Resources Division (EMRD) under the Ministry of Power, Energy and Mineral Resources (MPEMR) had a plan to float the tender on September 15, 2020.

The announcement to float the bidding round was planned to come on March 17, 2020 and the deadline for receiving bids from international oil companies (IOCs) was planned for March 10, 2021. Signing of production sharing contracts (PSCs) with bid winning IOCs were planned by May 26, 2021.

Under the plan, state-run Petrobangla was to launch the bidding round offering offshore blocks adjacent to gas-rich blocks of Myanmar.

But in reality, the country's deep sea turned 'idle' in terms of hydrocarbon exploration as the maiden deal with South Korean Posco International turned void recently.

With the exit of Australian Santos and Kris Energy from shallow-water block SS-11, exploration activities in shallow water block also squeezed further that too at a snail's pace.

Petrobangla floated last bidding round eight years back in 2012 through which shallow-water blocks and one deep-water block were awarded to contractors.

But not a single exploratory well was drilled by the contractors by this time. Petrobangla rather extended the tenure of PSCs for each of the contractors by two years each.

To allure the IOCs for the planned bidding round, Petrobangla had revised upward the price of natural gas in the latest model production sharing contract (MPSC).

And as per the model PSC 2019, the gas price for deep sea blocks was set at around $7.26 per MMBtu, or million British thermal unit, up by 11.69 per cent from the previous MPSC for the deep sea blocks.

The offshore gas price was set to increase every year by 1.5 per cent from the date of first gas production, according to the model PSC.

Currently, Bangladesh has a total of 31 open blocks for offer in the next bidding round. Of them, nine blocks are located in onshore areas, 14 in deep sea, and eight in shallow sea areas.

The entire local production comes from onshore gas fields. The country has not offered any onshore oil and gas blocks since 1997.

Against the backdrop of no drilling activities in the Bay of Bengal on behalf of Bangladesh now, an Indian oil and gas company, ONGC Videsh Ltd, is planning to start drilling an exploratory well at Kanchan later this month.

The Indian company will start drilling on behalf of Bangladesh after rescheduling its earlier plan following successful solution of a row over advance income tax and demurrage charges to port for delays in releasing equipment.

Had the row been resolved earlier, ONGC could have initiated the drilling at Kanchan in shallow sea block SS-04 in October 2019. The Indian firm has planned to drill the well, buoyed by the findings of two-dimensional (2D) seismic surveys.

It may be mentioned here that the drilling in SS-04 by ONGC is mandatory as per a production-sharing contract (PSC) between the consortium of ONGC and Oil India Ltd (OIL) and the state-run Petrobangla and the government. OGC will also have to drill another well in the shallow water block SS-09 by February 2021.

Petrobangla, however, extended the tenure of the contracts by two years to facilitate hydrocarbon exploration by ONGC. Currently, Bangladesh has no producing offshore gas well and the entire natural gas output comes from onshore gas fields as well as import of liquefied natural gas (LNG).

Any fresh discovery of hydrocarbon in an offshore field is expected to boost the country's future oil and gas reserves.

The current overall natural gas output is 3,175 million cubic feet per day (mmcfd) as of January 08. Of the gas volume, 596 mmcfd is regasified LNG and 2,563 mmcfd local gas.

Meanwhile, Bangladesh Exploration Company (Bapex) is set to initiate first-ever oil and gas exploration in offshore Magnama very soon under a joint venture with Australian Santos, said officials.

State-run Bangladesh Petroleum Exploration and Production Company Ltd (Bapex) earlier inked a 'binding offer agreement' with Santos under which it will carry out offshore drilling jointly with Santos at Magnama structure.

Bapex and Santos are currently mobilising rigs and all necessary equipment to commence hydrocarbon exploration at the offshore site, said a senior Bapex official.

Both the firms are readying works like engagement of drilling contractors and purchase of drilling equipment to begin exploration, It would be Bapex's first-ever offshore exploration programme.

The Santos-Bapex joint venture also eyes to initiate drilling of Magnama-2 well. The Magnama structure is located within block 16 areas where the now-shut Sangu well is located.

Interpretation of the survey had indicated natural gas presence in the Magnama structures that consisted of a number of stacked structural stratographic reservoirs with at least four zones marginally intersected in the Magnama-1 discovery well.

After acquiring Cairn's Bangladesh assets, Santos was seeking a JV partner to initiate drilling of Magnama structure over the past several years and Bapex came up in response. Bapex entered into a 'binding offer agreement' with Santos to carry out offshore drilling jointly in June this year.

Some exploration activities worth around $92.30 million were carried out at Magnama, located under the block -16 area so far. Santos has got majority stake of 51 per cent in the JV while Bapex will have 49 per cent stake.

Bapex so far drilled onshore gas wells in the country in gas fields either owned by Bapex or different state-run gas marketing and distribution companies.

Apart from the JV with Bapex, Santos has another JV with Singapore's KrisEnergy over oil and gas exploration in shallow water in the Bay of Bengal under block SS-11.

Santos and KrisEnergy already carried out 2D in the block and has planned to carry out further exploration there, said a senior Bapex official.

Gas production and exploration from Niko-operated fields remained suspended for around a decade following a row relating to payment for gas and compensation for gas-field blowouts.

The Bapex was a 'sleeping' partner in the Niko-Bapex JV and had a carried-over stake of 20 per cent while the remaining 80 per cent was with Niko.

Bangladesh's entire natural gas production now comes from onshore gas fields after the closure of Santos-operated offshore Sangu gas field in October 2013.

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