The government has dropped the plan to float international bidding for offshore hydrocarbon exploration in the Bay of Bengal before the upcoming general election.
“We’re instructed not to proceed with the plan to invite any bidding right at this moment, before the election,” a top official of the state-owned Petrobangla said.
“It was also decided not to proceed with ExxonMobil’s interest of expression (EOI). We’ve been asked to go slow on both issues,” he told UNB requesting anonymity.
Earlier, on July 26, the Cabinet Committee on Economic Affairs approved the draft ‘Bangladesh Offshore Model Production Sharing Contract (PSC) 2023’ in order to invite international bidding for hydrocarbon exploration in offshore areas of the country.
The final approval for the draft Model PSC 2023 was given under a plan to invite the bidding round within December.
Following the approval, on August 9, the then Energy Secretary Dr Md Khairuzzaman Mozumder said that the government planned to invite international bidding for offshore hydrocarbon exploration within a month.
Recently, State Minister for Power, Energy and Mineral Resources Nasrul Hamid, at a contract signing ceremony with US-based Excelerate Energy for importing LNG, said that the government will invite bidding on hydrocarbon exploration when the new government is formed after general election.
The government, meanwhile, signed a number of long-term deals with different companies to import LNG which drew criticism from energy experts, saying that the deals will make the country further dependent on imported energy.
According to official sources, the new Model PSC was prepared as part of a plan to invite international bidding within the current year for offshore deep and shallow water gas blocks, to make Bangladesh more attractive to international oil companies and draw investment in hydrocarbon exploration in the Bay of Bengal.
Under the initiative, the gas price was tagged with the price of Brent Crude in the international market to ensure flexibility.
“Under the plan, we’re going to offer the price of gas at 10 percent of Brent Crude,” the Petrobangla official told UNB. The official said if Brent Crude is traded at USD 75 per barrel, the gas price would be USD 7.5 per thousand cubic feet (MCF). The gas price will always remain linked to the international oil price, he said, referring to the new provision of the Model PSC 2023.
Alongside the Model PSC approval, the government was also in discussion with ExxonMobil which placed a USD 30 billion investment offer.
“The offer was an EOI where ExxonMobil expressed keen interest in the whole maritime area, considering a single block instead of 26 offshore blocks,” an official said adding, the US company, however, did not mention any oil or gas price in the proposal.
Official sources said the country has a total of 48 blocks, of which 26 are located offshore. Of the 26 offshore blocks, 11 are located in shallow sea (SS) water while 15 are located in deep sea (DS) water areas.
Of the offshore blocks, 24 remain open for IOCs while two blocks — SS-04 and SS-09 – are under contract with a joint venture of ONGC Videsh Ltd and Oil India Ltd where drilling work has recently started.
Bangladesh’s offshore area remains unexplored despite the settlement of its dispute with neighbouring Myanmar and India over maritime boundary almost nine years ago.
Currently, about 2300 mmcfd gas is being produced from 22 gas fields in the country, while about 700 mmcfd gas is being imported from abroad to meet the demand of about 4000 mmcfd, leaving a deficit of about 1000 mmcfd.
The government had last amended the Model PSC in mid-2019, whereby the price of gas for any participating IOC, that is, the price at which they would sell the gas to the government, was raised to USD 5.5 per MCF for shallow water blocks, and USD 7.25 per MCF for gas extracted from its deep sea blocks.
There was a target to invite international bidding in March 2020 for exploration in offshore areas, but that got postponed due to the coronavirus pandemic that emerged at the time.
“The recent upward trend in oil and gas prices has pushed the policymakers to further raise the gas price by introducing more flexibility and incentives including keeping the export option open in the PSC,” said another Petrobangla official.
He mentioned that the government had to import LNG at USD 36 per MMBtu while it was just below USD 10 early last year.
The Russia-Ukraine war has further deepened the global market volatility, pushing petroleum price over USD 100 per barrel, the highest in the last 7 years.
Now, again oil and gas prices are on a downward trend and Brent Crude is traded at USD 75 per barrel while LNG price is at below USD 14 per MMBtu.