State-run Petrobangla has reminded Australian oil and gas exploration company Santos and its joint venture (JV) partner Singapore's KrisEnergy to carry out its mandatory drilling programme as part of its contractual obligation.
The JV's bank guarantee worth US$11 million might be confiscated if it fails to carry out oil and gas exploration as per the production sharing contract (PSC) signed between the parties, said a senior Petrobangla official.
The tenure of the PSC signed between Petrobangla and the JV which got a two-year extension earlier is scheduled to expire in March 2021.
"We have sent a letter to the JV recently, asking them to complete their exploration works as per the contract," he added.
Santos and KrisEnergy inked the PSC to carry out hydrocarbon exploration in shallow-depth offshore sea block SS-11 in the Bay of Bengal on March 12, 2014 with a five-year exploration period, which expired on March 11, 2019.
Petrobangla, however, extended the tenure of the PSC by two more years, offering the JV opportunity to carry out the 'committed' explorations in the Bay of Bengal until March 2021.
The JV committed to drilling an exploratory well and carrying out 1,876 line kilometre (LKM) 2D (two dimensional) seismic survey and 300 square kilometre 3D survey during the five-year contractual period.
The JV, however, carried out 2D seismic survey in 3,220 LKM areas in 2017 and identified prospects that wooed it to conduct 3D seismic survey in around 305 square kilometre areas to explore hydrocarbon in shallow water in the sea.
"We have sent a reminder to the JV as it only carried out 2D and 3D seismic surveys as per the contract," the Petrobangla official said.
The mandatory drilling of the exploratory well has not yet been completed, he added.
To complete drilling of the exploratory well, the Santos-KrisEnergy must initiate works now, he added.
It will have to appoint drilling firm, and mobilise drilling equipment before initiating drilling works, he said.
But the JV has not yet started such works, the official alleged.
Industry insiders said, Santos has been searching for a buyer of its Bangladesh assets and seeking to pull itself out from Bangladesh operations. It has initiated a fresh search recently to find out a buyer of its Bangladesh stake as its recent attempt to sell stake to the UK-based Ophir Energy did not succeed.
Samtos earlier in 2017 drilled an exploration well in Magnama-2 under a JV partnership with state-run Bangladesh Petroleum Exploration and Production Company Ltd (Bapex) but 'failed' to discover a commercially viable hydrocarbon reserve.
Magnama structure is within Block-16 areas, where offshore Sangu well is located. The water depth of Magnama is up to 20 metres from nearby onshore Kutubdia Island.
Santos claimed to have delineated a semi-commercial discovery there, although it did not undertake any programme for further exploration.
Santos's predecessor - the UK's Cairn Energy - had discovered natural gas prospects in Magnama, penetrated by a single exploration well, around a decade ago.
Cairn drilled the exploration well in Magnama in 2008, and subsequently carried out a 2D seismic survey in 213 LKM area early 2010, a senior Petrobangla official said.
After acquiring Cairn's Bangladesh assets, Santos was seeking a JV partner to start drilling in Magnama structure, and Bapex came up in response.
