Bangladesh moves to put bigger bets on stake for international oil companies to explore potential hydrocarbons in the Bay of Bengal, amid fuel crunch, as energy ministry is scrutinising an offer placed by Petrobangla to boost incentives for the IOCs.
Officials say the latest bid is aimed at roping in the companies to take part in the ensuing offshore bidding round for the hydrocarbon exploration in the Bay.
The state-run Petrobangla has proposed linking its gas-purchase price from the international oil companies or IOCs with that of LNG on the international market under the proposed model production-sharing contract (PSC).
The state corporation opted for selecting Brent crude price as the benchmark for fixing the price of the natural gas to be purchased from the IOCs from offshore gas-fields under new bidding round.
"On completion of the scrutiny, the Ministry for Power, Energy and Mineral Resources (MPEMR) will place it with the cabinet committee on economic affairs for final approval," a senior MPEMR official told the FE Saturday.
Petrobangla hopes to launch a fresh offshore bidding round for oil and gas exploration in the Bay by the yearend, he said.
In the proposed model PSC, Petrobangla plans to fix price of the natural gas from deep-water blocks close to US$10 per Mcf (1,000 cubic feet).
If fixed in this market-based pricing formula, the new gas price for deep-water offshore blocks will be around 31-percent to 38-percent higher than the current price offered under the existing model production-sharing contract 2019.
The government has taken the initiative for sweetening the model PSC in line with the recommendations from Scotland's Wood Mackenzie-in the wake of worldwide energy crisis stemming from the Ukraine war and sanctions.
In the existing model PSC of 2019 natural gas prices for the IOCs are pegged to high-sulfur fuel-oil (HSFO) prices on the global market.
For shallow-and deep-water offshore blocks the ceiling price for HSFO is $215 per tonne, in accordance with the model PSC 2012.
The floor price in the model PSC 2019 and model PSC 2012was same at $100 per tonne. With this formula, gas price for deep-sea blocks was $7.25 per Mcf with a hike by 11.53 per cent from the previous $6.50 per Mcf.
For shallow-sea blocks, the gas price was $5.50 per Mcf with a hike by 9.09 per cent from the previous $5.0 per Mcf under model PSC 2012.
Gas price for deep-sea blocks, however, was set to escalate by 1.5 per cent from the date of first gas output under the new model PSC 2019 instead of the 2.0-percent annual escalation in the previous model PSC 2012.
It would take around eight years for the IOCs to get the gas price at US$ 8 per Mcf and 16 years to get at US$9 per Mcf under the model PSC 2019.
Under the model PSC 2019 the price of natural gas to be produced from onshore, shallow-sea and deep-sea gas blocks was kept unchanged at 75 per cent, 100 per cent, and 130 per cent of marker price as defined in the Asian Petroleum Price Index.
In the planned model PSC for the next bidding round Petrobangla has proposed to reduce government share in 'profit gas' between 40 per cent and 70 per cent from previous model PSC's 55 per cent to 80 per cent.
Profit gas means the available gas after the quantity corresponding to the value required for royalty payments and the investor has taken the cost gas under the PSC terms.
Petrobangla also proposed narrowing down differences of exploration benefits between deep-and shallow-sea blocks to attract the IOCs to take part in the next offshore bidding round.
"We are working to launch a fresh bidding for hydrocarbon exploration by the IOCs in both deep-and shallow-water offshore blocks by December 2022," Petrobangla chairman Nazmul Ahsan told the FE.
Petrobangla previously had floated the last bidding round nine years back in 2012 through which three shallow-water blocks and one deep-water block were awarded to contractors. Currently, four IOCs have active PSCs, either individually or under joint venture, to explore three shallow-water blocks for offshore exploration.
ONGC Videsh Ltd (OVL) and Oil India Ltd (OIL) are jointly exploring shallow-water blocks SS-04 and SS-09.
US oil-major Chevron is active in exploring and producing natural gas in three onshore gas-fields under onshore blocks 12, 13 and 14.
Singapore's KrisEnergy is producing natural gas from Bangora field under block 9.
Bangladesh currently has a total of 26 open blocks in offshore areas, of them 11 located in shallow water and the remaining 15 are in deep water.
"The upcoming bidding round is very important for ensuring the country's future energy security," Mr Ahsan said, as local gas shortages make the government opt for import of costly LNG or liquefied natural gas from the volatile global market.
Currently, Bangladesh imports lean LNG from RasGas of Qatar and Oman Trading International (OTI) of Oman to meet mounting natural-gas requirement.
Two operational 3.75 Mtpa (million tonne per annum)-capacity FSRUs - Excelerate Energy's Excellence and Summit LNG - are currently re-gasifying around 500 million cubic feet per day (mmcfd) of LNG in total to feed the consumers.
The country's overall gas output is around 2600 mmcfd including the re-gasified LNG of around 380 mmcfd.
