Offshore blocks could become the lifeline for development of Bangladesh as it has limited natural resources. The settlement of maritime boundary disputes with neighbouring countries has offered the country huge opportunities to explore hydrocarbon resources in the Bay of Bengal. Bangladesh has 26 blocks in the Bay. Of them 15 are deep-sea blocks and 11 are in shallow waters.
Bangladesh awarded deep-sea block-12 to Posco Daewoo Corporation of South Korea for gas exploration in June this year. Senior officials of Posco Daewoo and Bangladesh's Petrobangla and energy ministry signed a production sharing contract in this connection.
As per the agreement, two-dimensional seismic survey has begun, and based on the outcomes of the survey, the real picture of gas availability could be known by 2019. Posco Daewoo is also exploring gas at a block of neighbouring Myanmar and has discovered gas reserves there last year. The said block is adjacent to block-12 of Bangladesh.
South Korean officials are optimistic about finding gas in the block in question as the petroleum structure and geological setting are similar to the one held by Myanmar. If gas is found in the said block, it would meet Bangladesh's energy demands and stimulate its economic growth.
The Korean company is spending $3.0-5.0 million for carrying out a two-dimensional survey, $5.0-7.0 million for a three-dimensional survey, and $50-100 million for drilling wells.
Block-12 is over 3,560 square kilometres with depths between 1,000 and 2,000 metres. The initial exploration period is five years and the subsequent exploration period is three years. In the initial exploration period, the 2D survey would be carried out in the first two years over an area of 1,800 sqkm, the 3D seismic survey in the third year over an area of 1,000 sqkm and one exploratory well will be drilled in the fourth and fifth year.
Bangladesh will get 65 to 90 per cent of the profits from the sale of oil and condensate pumped out of the block. For natural gas it will be between 60 and 85 per cent. The Korean company could get a maximum of 70 per cent of the available petroleum per year to recover its exploration costs.
Bangladesh's efforts to attract international companies for exploration of deep-sea blocks were delayed due to low oil price in the international market for more than two years.
The low price discouraged oil companies from expanding in new territories. The government will hold more offshore block biddings in the next couple of years. The government is reported to have been working on four areas, including onshore, offshore and liquefied natural gas, to ensure the country's energy security. The government is focusing more on offshore resources. Mention may be made that the offshore accounts for a third of the hydrocarbon resources produced in the world.
In recent years, the country's natural gas production is 2,700 million cubic feet per day. However, the demand hovers at over 3,300 million cubic feet per day. As the gas reserves are depleting and there were no new gas discoveries, the government is pinning its hope on the deep-sea blocks.
Officials of Petrobangla said Bangladesh has amended its Model PSC 2012 keeping it in line with those in Myanmar and other countries in order to woo more international companies to explore its vast waters. This has been done as global oil giants were not keen on investing in projects that would not offer attractive incentives against the investment risk they would be taking.
The worldwide average cost of drilling a deepwater well is $100 million and can take several months to complete. Drilling rigs can cost as much as $1.0 million per day. Deepwater developments require large reserves, and the total number of wells needs to be kept small in order to make the project economically viable. The drilling cost component can be more than 50 per cent of the total capital expenditure. Hence, companies always try to ensure a very high gas production rate per well.
Meantime, an Indian company has also been assigned to drill an exploratory well in a shallow offshore block in the Bay of Bengal to discover hydrocarbons. The company -- ONGC Videsh Ltd (OVL) -- has reportedly moved to drill the well near Moheshkhali. It was inspired by the results of two-dimensional (2D) seismic surveys it had carried out in two shallow-water Bay blocks last year.
What is worrying is that the entire natural gas production comes from the country's onshore gas fields now. So far, exploration in the Bay for hydrocarbon failed to bring any fruitful result. Production from the Sangu, country's only offshore gas field, was suspended long ago due to non-availability of gas.
The country's gas sector is, in fact, in disarray. For the past few years, gas connections to new industrial and commercial units have virtually remained suspended. Even though new gas connections resumed last year, the government is contemplating on stopping it again.
Bangladesh started facing natural gas crisis in 2009 with rapid industrialisation forcing Petrobangla to ration natural gas supplies to gas-guzzling industries, power plants, compressed natural gas (CNG) filling stations and households.
Most of the IOCs (international oil companies) are not apparently interested in exploration of oil in the wake of rise in cost of investment. The cost of investment in oil and gas exploration shot up in the wake of price crunch of natural gas following fuel oil prices on the international market.
India and Myanmar have already discovered large gas reserves in the Bay of Bengal after the maritime boundary was settled by international courts. It is time the government and the private sector in Bangladesh also gave their maximum efforts to hunting for hydrocarbon in the Bay.