Petrobangla opens up bidding for Bangladesh oil, gas tender

State-run oil, gas and mineral corporation Petrobangla floated a tender, entitled, “Oil and Natural Gas Exploration Under Bangladesh Offshore Bidding Round 2024” in March to explore the country’s maritime area for hydrocarbons.

The deadline for international oil companies (IOCs) to submit bids is September 9th.

“We are expecting to award the offshore blocks to successful IOCs after evaluation by this year-end,” Nasrul Hamid, the state minister for the Ministry of Power, Energy and Mineral Resources, told Gas Outlook.

A good number of IOCs including those of reputed ones from the U.S., Europe and Asian countries have shown interests to take part in the bidding, he said.

Of the total offshore blocks on offer, 15 are located in deep sea and nine are in shallow sea.

The 15 deep sea blocks are: DS-08, DS-09, DS-10, DS-11, DS-12, DS-13, DS-14, DS-15, DS-16, DS-17, DS-18, DS-19, DS-20, DS-21 and DS-22.

The nine shallow water blocks are: SS-01, SS-02, SS-03, SS-05, SS-06, SS-07, SS-08, SS-10 and SS-11.

Petrobangla’s chairman Zanendra Nath Sarker that said production sharing contracts, or PSCs, will be inked with the IOCs in line with the newly approved model PSC through, which the terms have been made ‘lucrative’ for the contractors.

The IOCs will not require submitting any signature bond, he said, adding, they will not have to pay any royalty as well.

No import duties will be charged from the IOCs for import of machinery and equipment necessary for exploration and drilling, he said.

Petrobangla will bear the income tax liability on behalf of the IOCs, Sarker said.

The gas price for the offered blocks will be tagged to the price of brent crude on the international market so that the gas price becomes flexible in line with the movement of global oil prices, he said.

The gas price will be 10% of Brent Crude, meaning if the Brent crude is traded at $85/ barrel, the gas price would be $8.5/MMBTu, Sarker clarified.

Gas price will be same for both shallow and deepwater blocks, he added.

Petrobangla will purchase the explored IOC gas at the Brent crude-linked rate, which will have no capping, he added.

Capping-free price means Bangladesh will have to purchase the gas, to be extracted by the contractors, at a rate as high as it goes or as low as it slips, Sarker added.

The IOCs will also have the liberty to export natural gas after meeting domestic demand following Petrobangla’s first right of refusal.

They will be able to repatriate full profit too.

There will be provision for assignment of interest and share-transfer and 100% cost recovery with an annual cap of 75%.

The IOCs will, however, have to provide bank guarantees for performance of the minimum exploration programme.

Meanwhile contractors must have a mandatory work programme consisting of a 2D seismic survey and the mandatory purchase of available 2D multi-client seismic data to get relief from mandatory work obligations proportionately.

They will have minimum work obligations in each of the exploration periods of nine years, of which the initial study phase will last four years, then an exploration phase of two years and another three years for subsequent exploration, the Petrobangla chairman said.

Over the last decade Bangladesh launched only one bidding round — in 2017 — and that was only for three deepwater blocks, according to Petrobangla data.

Although Posco-Daewoo was awarded one deepwater block — DS-12 — after the bidding, the South Korean oil and gas exploration company left the block in 2020 after carrying out a 2D seismic survey.

Previously Petrobangla floated a bidding round in 2012, through which three shallow-water blocks and one deepwater block were awarded to contractors.

Currently, four IOCs have active PSCs, either individually or under joint venture, to explore three shallow-water blocks in Bangladesh.

U.S. oil major Chevron is active in exploring and producing natural gas in three gas fields under onshore blocks 12, 13 and 14. Singapore’s KrisEnergy is producing natural gas from the Bangura field under Block 9.

ONGC Videsh and Oil India are jointly exploring shallow water blocks SS-04 and SS-09.

The country is currently producing around 2.65 bcf/d of gas including 625,000 mcf/d of re-gasified imported LNG, according to Petrobangla data as on March 26, 2024.

Of the total gas production of around 2.03 bcf/d from local gas fields, two operational IOCs – Chevron Bangladesh and KrisEnergy – have been supplying around 1.35 bcf/d of gas, or 66.50% of the output.