Bangladesh Finalises Onshore Oil And Gas PSC, Targets Didding Within 180 Days

Bangladesh is finalising a model production sharing contract (PSC) to lease out onshore areas for oil and gas exploration, after already inviting tenders to appoint contractors for offshore exploration. The draft model PSC has been sent to the Law Ministry for vetting, with the government aiming to call tenders within 180 days of the BNP government led by Prime Minister Tarique Rahman taking office.

A Joint Secretary of the Energy Division told Ajker Patrika that a model PSC is being prepared for onshore oil and gas exploration. The official said the draft is now with the Law Ministry for vetting and will be sent for Cabinet approval once it is returned.

Officials said the new government’s 180-day action plan included inviting bids for oil and gas exploration. Tenders have already been invited for offshore contractor appointments, and preparations are being accelerated so that onshore tenders can also be invited soon.

According to relevant sources, no international tender has been invited for allocating onshore blocks since 1997. Chevron, which acquired the ownership of the US multinational Unocal, is now the country’s largest gas producer. Chevron operates the country’s three main gas fields in onshore blocks 12, 13 and 14, accounting for about 60 percent of total domestic output.

Russian company Gazprom has been involved in drilling various wells on behalf of state-owned BAPEX. Singapore-based KrisEnergy operates the Bangura gas field in block 9.

Muhammad Shoaib, Director (PSC) at Bangladesh Oil, Gas and Mineral Corporation, or Petrobangla, told Ajker Patrika that offshore tenders were recently invited under the offshore model PSC. He said gas is currently being produced from several of the 21 onshore blocks, while a new model PSC is close to being finalised for appointing contractors in the remaining blocks.

Asked what changes are being made in the onshore PSC, Shoaib said it was not possible to comment before finalisation. He said, however, that in the draft, some advantages previously extended to international oil companies in the offshore PSC, including in gas pricing and profit-sharing, had been somewhat reduced.

Petrobangla officials said the onshore model PSC sets gas prices at 8 percent of Brent crude. While offshore terms include pipeline construction and transmission charges at sea, there will be no such provision for onshore areas. The offshore PSC allows nine years for well drilling, while the onshore version will allow seven years. Seismic surveys must be completed within the first three years, and the concerned international oil company must complete drilling and other work in the remaining four years.

Energy expert Professor M. Tamim told Ajker Patrika that such an initiative for onshore oil and gas exploration should have been taken much earlier. He said the move was positive, even if delayed. He added that a tender had recently been opened for offshore exploration and that, despite some differences, the two PSCs would share many common features.

Professor Tamim said the whole country could be brought under bidding. He said that if BAPEX fences out certain locations but does not proceed with drilling there, those areas could be left to international oil companies or developed jointly with others.

Professor M Shamsul Alam, energy adviser to the Consumers Association of Bangladesh, told Ajker Patrika that gas price rates in model PSCs had been repeatedly increased since 2008. He said this had protected the interests of international oil companies while overlooking the country’s interests. He expressed hope that the fairness and justification of the benchmark gas price in the new PSC would be properly analysed. He also said the gas price should be presented to the public and public opinion sought.