South Korean oil and gas firm Posco International has intended to relinquish deep sea block DS-12, dealing a blow to the country's quest for discovering new hydrocarbon reserves.
Posco has informed the Energy and Mineral Resources Division under the Ministry of Power, Energy and Mineral Resources about its intention to leave the deep sea block unexplored, said a senior energy ministry official.
Earlier, the Korean firm had long been searching for a partner to drill an exploratory well in the block area, but none came up.
Sources said the hike in the latest model production sharing contract, PSC, for the next round of offshore bidding might have prompted Posco to relinquish the block expecting a higher price in future.
Under the existing PSC, the Posco would get natural gas price at around US$6.50 per mmBtu (million British thermal unit) with a 2.0 per cent annual price escalation from the date of first gas production.
But under the newly-adopted PSC, gas price has been set at around $7.26 per mmBtu with a 1.5 per cent annual price escalation from the date of first gas production.
The Posco-Daewoo Corporation, a joint venture of Korean Posco and Daewoo had inked PSC in March 2017 with state-run Petrobangla under the Speedy Supply of Power and Energy (Special Provisions) Act 2010 bypassing tendering.
Posco later acquired Daewoo to become the lone stakeholder of the deep sea block DS-12.
Before the relinquishment plan, Posco carried out 2D or two-dimensional seismic survey in around 3,480 kilometre areas, which are double its committed area for the survey.
The South Korean company could detect around half a dozen potential spots for having hydrocarbon reserves following the 2D survey, said a senior Petrobangla official.
Currently, Daewoo is the lone international oil company involved in hydrocarbon exploration in deep sea inside the Bangladesh's territory.
Petrobangla had earlier awarded the DS-12 block along with two other deepwater blocks, DS-16 and DS-21, to a joint venture of US's ConocoPhillips and Norwegian Statoil under the previous 2012 bidding round.
Both ConocoPhillips and Statoil refused to ink PSC on 'poor fiscal terms' in the model contract.
DS-12 is located in depth ranging from 1,000 m-2,000 metres, having a size of 3,560 sq km.
Bangladesh is trying to promote the exploration in the Bay of Bengal to help meet its soaring energy demands.
The country's natural gas output is hovering around 3,140 mmcfd, some 557 mmcfd of it is regasified LNG. The entire local production comes from onshore gas fields.