The coronavirus pandemic has forced the government to shelve the plan for launching a fresh bidding for offshore drilling, fearing poor response from the potential global players.
Bangladesh was, in fact, scheduled to float the tender back in March this year. The government now thinks that global oil and gas exploration companies might not be interested to take part in the competitive bidding to carry out 'expensive' offshore exploration in the current situation.
The lower oil and gas prices in the international market are other reasons for suspending the bidding round. According to reports, nobody in the ministry could tell when the next offshore bidding round would take place.
The country's dependence on fuel imports, especially on expensive liquefied natural gas (LNG) will naturally go up for shelving the plan.
The plan to float the bidding round was supposed to be announced on March 17, 2020 and the deadline for receiving bids from international oil companies, IOCs, was on March 10, 2021.
Signing of production sharing contracts (PSCs) with the bid winning international oil companies (IOCs) were planned by May 26, 2021. Under the plan, state-run Petrobangla was scheduled to launch the bidding round offering offshore blocks adjacent to gas-rich blocks of Myanmar.
In fact, 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 Posco from block DS-12, the country's oil and gas exploration activities in offshore areas are now limited to only some shallow water blocks, which are also progressing at a snail's pace.
It is now evident that under the current situation of pandemic and the subsequent fall in oil and gas prices, a few firms will be interested to engage in deep sea exploration.
The country, in fact, missed the opportunity to award deep offshore blocks to potential global contractors around a decade back when the government initiated the process of importing LNG.
Petrobangla floated the last bidding round 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 until this time. Yet the tenure of PSCs was extended for each of the contractors by two years each.
To attract IOCs for the planned bidding round, Petrobangla had revised upward the price of natural gas in the latest model production sharing contract or PSC. And as per the model PSC in 2019, the gas price for deep sea blocks was set at around $7.26 per million British thermal unit (MMBtu), up by 11.69 per cent from the previous contract for the deep sea blocks.
Bangladesh currently has a total of 31 open blocks on offer in the next bidding round. Of them, nine blocks are located in onshore areas, 14 in deep sea, eight in shallow sea areas.
The country's natural gas output is hovering around 3,138 million cubic feet per day (mmcfd), of which 600 mmcfd is re-gasified imported LNG, according to Petrobangla sources.
The entire local production comes from onshore gas fields. Currently, five IOCs have active PSCs either individually or under a joint venture to explore three shallow-water blocks for offshore exploration. The country has not offered any onshore oil and gas blocks to the IOCs since 1997.
Energy experts, however, say the country should go for unconventional way of drilling utilising the latest technology to explore new gas from old and dried up gas fields. Areas of carrying out two-dimensional and three-dimensional seismic surveys should be expanded to pinpoint exact drilling locations.
Meantime, natural gas production from the existing Titas gas-field is depleting rapidly due to 'failure' in installing well-head compressors on producing wells. It is the country's largest producing gas-field among the state-operated ones.
The authorities' failure to increase natural gas supply from Titas gas-field worsened the country's overall natural gas supply situation. It prompted the government to import expensive liquefied natural gas (LNG) to meet the mounting natural gas demand. Above all, Titas gas field is dwindling fast.
Chinese energy exploration firm Sinopec has found onshore natural gas prospect at Shariatpur after a 2D seismic survey. The pre-discovery sign is the latest in five years. Currently, the country has a total of 21 active gas fields while one remains inactive. Production of gas remains suspended in four gas fields.
The country discovered only four onshore gas fields with total recoverable reserves of around 800 billion cubic feet (Bcf) over the past decade. The onshore gas fields are Bhola, Rupganj, Srikail and Sundalpur.
According to geologists, Bangladesh territory in the Bay of Bengal holds the biggest oil and gas prospect. Although the country's gas and oil sector is apparently vulnerable to regional politics, the government needs to take some prompt actions for facilitating a massive exploration drive.
If IOCs are engaged in the offshore exploration drives, the country can expect to reap some quick gains. A modest discovery of hydrocarbon in the offshore fields may usher in a new era for the country.
In fact, high optimism was aired on discovering new hydrocarbon in the Bangladesh's deep-sea block DS-12 located adjacent to Myanmar's AD-7 offshore block where the Korean firm was also the operator. DS-12 and AD-7 are located in similar geological structures in the Bay of Bengal. With the withdrawal of the Korean firm, the hope of getting similar result from the Bangladesh gas block has been dashed.
There is no denying that the country has been facing critical gas supply situation for the last few years due to the discouraging performance in exploration, exploitation and extraction of gas from its 'hidden' reserves.
The recent discovery of huge gas reserves by India and Myanmar in the Bay of Bengal near Bangladesh's economic zone is clearly an eye-opener to go all-out for deep-sea exploration.
The country urgently needs massive investments from international oil and gas companies given the financial and technological constraints of its own state-run firms. According to experts, investment worth over $30 billion is needed to tap the gas potential in the Bangladesh part of the Bay of Bengal.
In the circumstances, the government needs to adopt an integrated policy framework involving the private sector for accelerating drilling activities both at onshore and offshore fields. Bangladesh should also develop expertise and adequate skilled manpower for carrying out exploration work to be self-sufficient in energy.