The Financial Express, 3 October 2012
The block map for launching the country’s offshore bidding round for oil and gas exploration in the Bay of Bengal is now awaiting cabinet nod for approval, a top official said Monday.
The state-owned Petrobangla will formally launch the country’s fourth round bidding, inviting international oil and gas exploration firms to explore hydrocarbon in the Bay, following approval of the block map from the cabinet, he said.
Petrobangla has already drafted a block map with some 12 offshore gas blocks – nine in shallow water and three in deep water – for offering in the country’s upcoming offshore bidding round, planned to be launched this month.
It has created the blocks and demarcated those in line with the International Tribunal for the Law of the Seas (ITLOS) verdict that settled maritime boundary dispute between the neighbouring Bangladesh and Myanmar.
The tribunal based in Hamburg, Germany, upheld Bangladesh’s claim to an exclusive economic zone of 200 nautical miles in the Bay of Bengal, and to a substantial share of the outer continental shelf beyond.
Only the undisputed areas and the areas settled with Myanmar would be included in the bidding jurisdiction, he said.
But two discovered gas-fields – Kutubia and Teknaf – have been kept in the bidding as ‘ring-fenced’, sensing their special prospect.
The bid-winning contractors would have to provide 5.0 per cent extra profit of gas to Petrobangla, if gas is produced from these fields.
The dispute between Bangladesh and India remained pending with the Hague’s Permanent Court of Arbitration.
The verdict of the UN’s Convention on the Law of the Sea (UNCLOS) is scheduled to be available in 2014.
The government finalised this month the production sharing contract (PSC) for its planned bidding round in October, allowing a 72.41 per cent higher domestic sales price for natural gas, discovered in the offshore blocks it would offer.
The Cabinet Committee on Economic Affairs stamped the seal of approval on the model PSC-2012 on September 11. Gas export, in any form, has been prohibited under the model PSC. This will be the country’s fourth bidding round following those in 2008, 2001 and 1997.
The bid documents are set to be available for sale on October 15 – December 15, with the bidding’s closing date in February 2013, said a Petrobangla official.
Gas prices are pegged to high sulfur fuel oil (HSFO) prices in Bangladesh. For the planned 2012 offshore bidding round, the floor price for HSFO was raised to $100 per tonne and the ceiling price set at $200 per tonne, Energy Secretary Mohammad Mesbahuddin said Tuesday.
The gas price would be around $5.00 per unit (1,000 cubic feet) based on the proposed pricing formula.
In the 2008 bidding round, the floor price for HSFO was fixed at $70 per tonne, and the ceiling price at $180 per tonne. Gas price was then around $2.90-$2.95 per unit.
According to the model PSC for the planned bidding round, Petrobangla’s regular profit sharing structure is – it will get no less than 55 per cent of profit if natural gas production is up to 75 million cubic feet per day (mmcfd), no less than 60 per cent if production is 76-150 mmcfd.
The organisation will get no less than 65per cent if the output is 151-250 mmcfd, no less than 70 per cent if output is 251-400 mmcfd, no less than 75 per cent if output is 401-600 mmcfd, and no less than 80per cent if output is above 600 mmcfd.
Other features of the model PSC includes full repatriation of profit, no signature bonus or royalty, no duty for equipment and machinery imported for operations during the exploration, development and production phases, cent per cent cost recovery, and production bonuses.
Exploration period for shallow water gas-blocks would be seven years instead of previous eight years, and for deep water it would be eight years instead of previous nine years.
The companies would also be able to sell the produced gas directly to third parties in the domestic market, without going through Petrobangla. But the latter would have the first right of refusal.
Bangladesh Economy 
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