Originally posted in The Financial Express on 12 April 2022
Scottish consultancy hired to sweeten model exploration contract
Scotland’s Wood Mackenzie will work for sweetening Bangladesh’s model production-sharing contract (MPSC) to lure international oil companies (IOCs) to explore hydrocarbons in the Bay.
The hiring of the foreign firm for doing the spadework for searching oil and gas in the country’s potential offshore turfs comes under urgency as fallout from the global fuel war over Ukraine invasion begins to pinch, sources say.
State-run Petrobangla picked the Edinburg-based firm from among seven other global consultants to carry out the job of upgrading the MPSC, paving the way for the launch of the long-awaited fresh bidding for offshore exploration.
This is the first time Petrobangla has selected a global consultant to redraft its MPSC. Previously Petrobangla would do it alone, time to time, before initiating any fresh bidding for oil-and-gas exploration.
“Wood Mackenzie will get until June 2022 to review the MPSC 2019 to make it attractive, competitive and internationally acceptable for oil-and- gas exploration and development,” a senior energy ministry official told the FE Sunday.
The existing MPSC for offshore blocks, which was prepared in 2018 and was approved by the cabinet committee on economic affairs in 2019, lacks sufficient baits to draw the IOCs into exploration in Bangladesh’s offshore blocks, he adds.
Officials said the government had a plan to float an international tender to carry out hydrocarbon exploration in offshore fields on September 15, 2020.
The announcement to float the bidding round was planned to come on March 17, 2020 in celebration of the centenary of birth of Bangabandhu Sheikh Mujibur Rahman.
The deadline for receiving bids from the IOCs was planned for March 10, 2021, while signing PSCs with the bid-winning IOCs was planned by May 26, 2021.
Petrobangla was to launch the bidding round offering offshore blocks adjacent to gas-rich blocks of Myanmar, the neighbouring country against which Bangladesh won an international arbitration over ownership of the Bay of Bengal maritime territories.
But the government backed down in the wake of the global spread of deadly coronavirus after 2019, which has changed the global economic ecosystem, especially of energy sector where the demand for LNG (liquefied natural gas) as clean fuel soared significantly.
“Updating the MPSC is necessary to attract the potential IOCs under the post-Covid circumstances,” says a senior Petrobangla official to justify the revisiting of the model deal.
Sources say under the existing MPSC 2019, the gas price for deep- sea blocks was set at around $7.26 per million British thermal unit (MMBtu), up by 11.69 per cent from the previous MPSC for the deep-sea blocks.
The offshore gas price was set to increase every year by 1.5 per cent from the date of first gas production, according to the latest MPSC.
Petrobangla had floated the last bidding round nine years back in 2012 through which shallow-water blocks and one deep-water block was awarded to contractors.
But not a single exploratory well was drilled by the contractors to date.
The country has not offered any onshore oil and gas block since 1997, thus resulting in a long lapse and consequent shortages in the fuel for industries and households.
Bangladesh currently has a total of 26 open blocks in offshore area, of them 11 located in shallow water and the remaining 15 are in deep water.
The country’s natural gas output is currently hovering around 3,100 million cubic feet per day (mmcfd), of which 850mmcfd is regasified imported LNG, according to Petrobangla statistics as on April 9, 2022. The entire local output comes from onshore gas fields.
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 gas field under block 9.