Speeding up offshore gas hunt

After a long period of lull, a joint survey is now underway to discover hydrocarbon in the offshore areas. This will be the first-ever joint survey in the country by the international oil companies (IOCs) that are engaged in hydrocarbon exploration under separate production sharing contracts (PSCs).

Bangladesh's entire natural gas production of around 2,700 million cubic feet per day (mmcfd) now comes from onshore gas-fields after the closure of Santos-operated offshore Sangu gas-field in 2013.

Reports say the joint survey is aimed at reducing the cost. South Korean oil and gas firm Posco Daweoo Corporation and Australian oil and gas major Santos are expected to carry out the offshore survey jointly in order to discover hydrocarbon reserves in the Bay.

Currently, most of the oil and gas exploration activities inside Bangladesh are carried out under two separate production sharing contracts (PSCs). The South Korean firm has been tasked to carry out exploration activities in deep-sea block DS-12. The firm has planned to invest initially US$112 million to carry out exploration in the deep-sea block.

However, an amount of $5.0-7.0 million is estimated to be required for investment during the third year of exploration when Daewoo has committed to carry out 3D survey in 1,000 square kilometres area. During the fourth and five years, the Korean firm is likely to invest around $50-100 million to drill at least one exploration well in the block.

Two of the Daewoo-operated blocks -- A-1 & A-3 -- in Myanmar are currently producing around 500,000 mmcfd of natural gas. Currently, no oil- and gas-exploration activities are being carried out in Bangladesh's deep offshore hydrocarbon turfs, much to the dismay of the concerned citizens.

As per the PSC, Daewoo will bear all the exploration costs. Cost recovery is subject to discovery of hydrocarbons, which will be to the tune of maximum 70 per cent per year of available hydrocarbon. No cost recovery of expenses and provision of compensation due to contractors' negligence are there in the deal.

If hydrocarbon is discovered, Petrobangla will share profit at the range of minimum 65 per cent and maximum 90 per cent for oil or condensate and minimum 60 per cent and maximum 85 per cent for natural gas.

On the other hand, Santos has stakes in offshore Magnama structure, located within block 16 areas, where the now-shut Sangu well was located. Santos's predecessor UK's Cairn Energy discovered presence of natural gas in Magnama around eight years ago.

Santos had a joint venture (JV) with state-run Bangladesh Petroleum Exploration and Production Company Ltd (Bapex) to drill Magnama well. But the JV could not so far discover any commercially viable hydrocarbon there. Apart from the JV with Bapex, Santos has another JV with Singapore's KrisEnergy for oil and gas exploration in shallow water in the Bay of Bengal under block SS-11.

There is no denying that Bangladesh is currently dependent on onshore fields for gas output, with production hovering around 2,700 mmcfds against a demand for over 3,300 mmcfd. The shortfall has resulted in the rationing of the fuel to industries, power plants and fertiliser factories and the suspension of new piped gas connections to commercial and household consumers.

In fact, high optimism was aired on discovering new hydrocarbon in the Bangladesh's deep-sea block DS-12, which is located adjacent to Myanmar's AD-7 offshore block where the Korean firm is the also the operator. DS-12 and AD-7 are located in similar geological location in the Bay of Bengal. The Koreans expect a similar result from the Bangladesh gas block.

Some of the global oil giants had earlier made a strong plea to Bangladesh government for carrying out a seismic survey in the Bay of Bengal, prior to floating of tender. They had also recommended splitting the country's offshore sea territory into a number of small gas blocks to accommodate an increased number of IOCs in offshore hydrocarbon exploration. However, the government did not take any initiative in this respect.

What is needed is that the government should adopt an integrated policy framework involving the private sector for accelerating drilling activities both in onshore and offshore fields. The country needs to develop expertise and adequate skilled manpower for carrying out exploration work in both the fields to be self-sufficient in energy sector. 

The recent discovery of huge gas reserves by India and Myanmar in the Bay near Bangladesh's economic zone is clearly an eye-opener to go all-out for deep-sea exploration.       

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