Draft contract improved to attract more foreign firms to offshore gas exploration

The government has approved the draft of a new Production Sharing Contract model with an aim to attract more international oil and gas companies for the exploration of gas and oil in the country's offshore areas.

The "Draft Bangladesh Offshore Model Production Sharing Contract (PSC) 2023" was approved yesterday at the 16th meeting of the Cabinet Committee on Economic Affairs.

The new model has been fine-tuned bringing several changes to the old formula, according to Petrobangla sources.

This is the final approval to the draft model PSC 2023.

State-owned Petrobangla will now invite international bidding for hydrocarbon exploration in deep and shallow sea areas with this new PSC model.  

Some international oil and gas companies have already proposed to explore the sea areas of Bangladesh.

Among them, US multinational ExxonMobil has offered to explore the entire deep and shallow sea area of Bangladesh. 

However, since the PSC is not final, the government has not yet taken any decision on the proposal.

Gas price on Brent Crude

In the new contract model, the international market price of Brent Crude will determine gas price. Foreign companies will be offered 10% of Brent Crude price for 1,000 cubic feet of gas. 

In the existing PSC, the price of shallow and deep sea gas production was fixed at $5.60 and $7.25 respectively.

The model also improves cost recovery share for hydrocarbons from shallow sea blocs from 55% to 70%.

Under a Model PSC, normally, if any international oil company (IOC) discovers gas, it gets a 40% stake while the government obtains the remaining 60%, adds UNB.

The government also buys the IOC's gas at a certain price. So if the gas price is raised, IOCs feel encouraged to invest in exploration work.

The country has a total of 48 blocks, of which 26 are located offshore. Of the 26 offshore blocks, 11 are located in shallow sea (SS) water while 15 are located in deep sea (DS) water areas, UNB reports citing official sources. 

Of these, 24 offshore gas blocks remain open for IOCs while two blocks—SS-04 and SS-09–are under contract with a joint venture of ONGC Videsh Ltd and Oil India Ltd where drilling works have recently started.

Currently, about 2300 mmcfd gas is being produced from 22 gas fields in the country, while about 700 mmcfd gas is being imported from abroad to meet the demand of about 4000 mmcfd, leaving a deficit of about 1000 mmcfd.

The new proposal has been prepared as per the recommendations of a Scottish consultancy firm, Wood Mackenzie, which was appointed last year to work out the new plan for Petrobangla to attract international bidding from IOCs.

Other approvals

Meanwhile, the Cabinet Committee on Government Purchase has approved a total of 13 proposals worth Tk18,480 crore. 

The Bangladesh Petroleum Corporation (BPC) will import 16.80 lakh tonnes of refined oil at Tk12,850 crore for the rest of this year.

The fuel will be imported from six state-owned companies in Thailand, UAE, China, Indonesia and Malaysia.

Besides, the committee has also approved the purchase of 8,000 tonnes of lentils for Tk75.59 crore, and 80 lakh tonnes of soybean oil for Tk131.16 crore.

The procurement of 6.45 crore books for academic year 2024 at a cost of Tk6.48 crore was also approved.