Bangladesh: Deep Water Exploration

 

 

 

Bangladesh: Deep Water Exploration

Bangladesh is suffering from severe gas supply crisis over the past several years. Chronic gas deficit has affected fertilizer production, power generation and even operation of industries, including export-oriented industries. Many investors invested their fortune in setting up new industries are in serious anxieties about getting gas supply for commencing production.

The government has initiated the process of importing expensive LNG for meeting the gas deficit. We are aware that setting up of FSRU, land-based terminals and importing LNG from the volatile global market alone require time and huge investment and consequently would create great vulnerability in the long term energy security. A country like Bangladesh having very limited opportunity for setting up enabling infrastructure for imported fuel should not rely almost exclusively on imported fuel. Bangladesh is a least explored riverine delta. One cannot completely rule out the possibility of finding new petroleum resources in onshore and offshore areas. Bangladesh needs to have right mix of own and imported fuel for ensuring long term energy security. We have to explore and exploit our own petroleum resources to the fullest extent. But unfortunately the present exploration campaign is well below the required level. For the last 17 years very little exploration has been done. Proven recoverable gas reserve is fast depleting, raising concerns of getting completely depleted by 2030. Expediting the exploration campaign, the reserve must be replenished by further strengthening BAPEX technically and financially, and engaging IOCs in onshore tight structures, deep drilling, western region and offshore. Well planned and carefully executed exploration campaign can only change the scenario in 5-7 years. In the present state, offshore exploration campaign is on a destination unknown.

Successful resolution of long standing maritime dispute of Bay of Bengal with Myanmar and India came as a blessing. We could start getting the benefits from our offshore resources by now if we could plan exploration program properly and implement professionally. Our next door neighbors, Myanmar and India, have advanced to a great extent in offshore explorations in the Bay of Bengal over the past five years. Bangladesh was the first country entering the Bay of Bengal for offshore exploration immediately after liberation. It was indeed a milestone achievement for the present government in its past term. It is also equally frustrating that Bangladesh in five years failed to even engage a contractor for conducting multi-client survey for acquisition of data and information of deepwater prospects. Bangladesh needs a database of information in its PSC package for attracting IOCs in considering risk-investment in deep offshore. Bangladesh also needs further updating of the draft model PSC to make this as attractive as the PSC documents of India and Myanmar. Needless to mention that IOCs have lost incentive in offshore exploration due to low pricing trend of crude oil in the global market. In the backdrop of chronic gas crisis prevailing in Bangladesh, it is very urgent that Bangladesh do everything possible to expedite exploration campaign in deep water alongside shallow water and onshore frontier areas.

The only success of offshore drilling was discovery and development of Shangu offshore gas field by a joint venture of Shell–Cairn and Holland Sea Research in late 1990s. First Cairn and then Australian company Santos operated the field for some years. Shangu came as a blessing for the gas-starved Chittagong region after major depletion of Bakhrabad and disputes with NIKO suspending works at Feni field. But depletion of Shangu also created curse for gas franchise in greater Chittagong. Bangladesh has so far failed to carry out very urgent offshore exploration in the offshore. Snatos with KrisEnergy JV partner is waiting for carrying out exploration in a shallow water block. Indian company ONGC is also working in two blocks — one of which is further development of Kutubdia gas field discovered by UNOCAL in 1970s. Daewoo Posco has signed PSC for two offshore blocks where ConocoPhilips worked for some years and later relinquished after failing to successfully renegotiate gas price. Apart from these, Australian company Woodside Petroleum has submitted proposal for carrying out exploration in five deep water blocks.

It may be mentioned here that after independence of Bangladesh, Bangabandhu-led government was the first in the region to enter the Bay of Bengal for offshore exploration. After formation of Oil & Gas Corporation (Now Petrobangla), Bangladesh in the shortest possible time could engage six IOCs in eight offshore blocks through formulating model PSC and inviting the first bidding round. But after unfortunate assassination of Bangabandhu along with most of the members of his family in August 1975, the IOCs left Bangladesh one by one. Petrobangla and Bangladesh failed to resume offshore exploration with the same intensity ever since. With vast offshore area, almost the size of Bangladesh, open for exploration, EMRD and Petrobangla have so far failed to engage contractor for conducting multi-client surveys for acquiring data and information of offshore petroleum resources. Bangladesh desperately needs preparing a database of information, without which IOCs may not show interest for making risk investments.

Chronological Development of Petroleum Exploration

One of the major initiatives of Petrobangla since its formation was organizing petroleum block bidding, evaluating offers, negotiating Production Sharing Contracts (PSCs), supervising and administering PSCs with International Oil Companies (IOCs). From 1974 to 2017, four bidding rounds were conducted.

In the first round of block bidding in 1974, six IOCs — Ashland, ARCO, BODC (Japan), Union Oil Company, Canadian Superior Oil and Ina Naftaplin — were awarded eight offshore blocks under PSCs. The companies conducted 31,069 km of marine seismic surveys and drilled seven wells. Kutubdia gas field was discovered by Union Oil Company in 1977. Before and after these exploration activities, maritime boundary disputes surfaced between Bangladesh and Myanmar, Bangladesh and India. IOCs started leaving Bangladesh and by 1978 all left abandoning the PSCs. Moreover, the essence of these PSCs was exploring oil. Finding no oil was a disincentive for the IOCs.

The first bidding round was followed by an interim period when Shell Oil Company (Shell) signed contract with Petrobangla for exploration blocks in Chittagong Hill Tracts (Block number 22). They were also awarded block 23 in the northern region. Seismic surveys were carried out and two exploration wells were drilled at Sitapahar and Salbanhat. An unfortunate insurgency act in CHT leading to abduction of Shell officials caused the company to leave Bangladesh. Scimitar Exploration Company was awarded a PSC for exploration in Surma Basin (later block 13). Jalalabad Gas field was discovered.

The next bidding round, named as second bidding round, was held in 1993. Four IOCs Occidental (blocks 12, 13 & 14), Cairn Energy (blocks 15 & 16), Okland-Rexwood (blocks 17 & 18) and United Meridian Corporation (Block 22) were awarded 8 blocks. The third formal PSC block bidding was conducted in 1997. Tullow-Chevron-Texaco-Bapex was awarded block 9. Shell-Cairn-Bapex was awarded blocks 5 & 10 and Unocal- Bapex was awarded block 7. During this bidding round, a mandatory provision of 10 percent carried interest for BAPEX was introduced and implemented for all blocks.

The fourth bidding round 2008 in the offshore attracted some IOCs, but maritime boundary disputes in most of the blocks acted as major impediment. However, the government could manage concluding PSC with ConocoPhilips for deep water blocks DS-10 & DS-11 on June 16, 2011. Conoco conducted 2,680 line kilometer 2D seismic survey in February–March 2012. They conducted additional 3,180 line kilometer 2D survey in the blocks in March–April 2013 for getting better knowledge of the blocks. It made a presentation on Comprehensive Technical Evaluation of the Petroleum Potential of Blocks DS -10 and DS -11 on 26 October, 2014. Considering further investment for exploration uneconomic, ConocoPhilips terminated PSC for blocks DS -10 and DS -11 and relinquished the blocks. From 15 June 2014, these blocks became free again.

Immediately after resolution of maritime boundary dispute between Myanmar and Bangladesh in March 12 by ITLOS, Petrobangla reorganized the blocks taking into account the new boundary. The PSC bidding round was announced in December 2012. Three shallow water PSCs have been signed with ONGC Videsh, Oil India & BAPEX Joint Venture — two PSCs for blocks SS-04 and SS-09. Santos, KrisEnergy and BAPEX JV have been awarded SS-11. PSC has also been concluded with DAEWOO–POSCO for DS-12, DS-16 & DS-21.

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