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Exploration in Block 22

Govt 'extending' PSC with two US companies

SHARIER KHAN
The government is 'extending' a Production Sharing Contract (PSC) with US oil companies UMC and Ocean Energy for oil and gas exploration in Block 22 although the contract was terminated six months ago.
UMC and Ocean Energy lost their PSC in October last year for failing to fulfil their obligations in two rounds.
Sources said, at the instruction of the energy ministry Petrobangla has prepared its terms and conditions for the PSC extension.
Petrobangla has proposed that the oil companies would have to drill four wells by February 15 next year and that they would have to provide a bank guarantee of 12 million US dollars.
Agreeing on the drilling and the deadline, UMC and Ocean Energy said they would like to provide the bank guarantee in instalments. However, Petrobangla does not agree to this proposition.
"The proposed extension of contract would not allow UMC-Ocean Energy to assign any new party in the exploration and production," said one source.
"The extension is at the final stage," the source said. "If UMC-Ocean Energy agree to Petrobangla's terms, we see no problem in the deal."
Sources in the energy sector claimed that though UMC-Ocean Energy spent over 15 million dollars for oil and gas exploration and lost
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another six million dollars of bank guarantee because of their contractual failure, they were seeking further extension of the PSC because they want to sell out half of the block's rights to a new investor.
The American companies were discussing the sell-out with Indian Oil Company GAIL.
As per the contract, the government could not prevent such a sell-out once the PSC is extended, the sources pointed out.
Their PSC for oil and gas exploration in the remote Chittagong Hill Tracts region was terminated in January 2000 after three years of unsuccessful activities. It was given a one-year extension in the following month although there was no such contractual provision. And that also was terminated in February 2001.
Successful lobbying gave the oil companies a second chance in March 2001 for yet another year. But once again the company failed to fulfil the minimum work commitment.
During this process, as per the PSC Petrobangla liquidated UMC-Ocean Energy's bank guarantee of three million US dollars in early 2001 and
again early last year.
They were lobbying hard at the political level to get a third chance from mid-2002. "They even lobbied with the Prime Minister's Office," one source said.
The UMC-Ocean Energy's venture in Bangladesh was suffering due to cash crisis all along. It had attempted to drill an exploratory well in Kasalong. But it failed repeatedly due to lack of funds.
Previously, British company Cairn sold out half its concerns to Shell Oil and US Company Occidental sold out its concerns to Unocal. The government had no say in these deals. But in both the cases, Cairn and Occidental's PSCs were in effect.
The government also extended the "terminated" PSCs of Occidental and Okland-Tullow. Both the companies failed to fulfil their work commitments.
Following unsolicited negotiations for over a year during the tenure of the previous BNP government, UMC signed its PSC with Petrobangla during the Awami League rule in the second week of January, 1997. UMC began its seismic survey in Block 22 covering an area of 1100 kilometres in late '97.