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'One company, one block’ formula

Shell threatens to withdraw from bidding process

By Shahrier Khan
The world's biggest oil and gas company. Snell Oil, has warned the government that it would withdraw from the second round of block bidding if the government sticks to the "one block, one company" formula in the negotiation process, instead of a ^standard competitive formula." according to sources.
The government began negotiations on Wednesday last lor exploration of oil and gas in 12 exploration blocks in the country. Twenty foreign companies
and one local company — BAPEX — had submitted 36 proposals on June 15 last.
Last week, all of a sudden, the government told bidders that it would go by "one company. one block" formula to select companies.
The announcement, coming with invitations for negotiations. took participating international oil companies (IOCs) by surprise who were earlier told that it would be a "competitive bidding."
Some five IOCs registered
written protests with the government for "such an unfair" change in the terms and conditions of the bidding.
The sources said that representatives of Shell Oil — which submitted proposals for six blocks — had met high officials of the Energy Ministry and the Petrobangla late last week and "expressed their surprise".
During the talks. Shell was offered Block 10 under "one block, one company" formula. But Shell's representative refused the proposal saying that they wanted to participate in the bidding on the basis of qualifying in the evaluation report. "They ca'*goncally said that if go\, un cut slicks to the one bh ■ k. one company formula. Shell would have to withdraw from the bidding."
Block 10. which was offered to Shell, covers Patuakhali-Bhola area. On the one hand the government is offering Block 10 to Shell while on the other hand it is linalising an agreement with a US company for development of the Shahbazpur Gas field in Bhola, the sources said adding, the offer excludes the Shahbazpur field.
They also insisted on revealing the proposal evaluation report by the Second Round Block Bidding Evaluation Committee of the govi-rnuunt. The evaluation re|>oi i was supposed to be completed by August 15.
Sources in the Energy Ministry said that if the government goes by the evaluation report. it may so happen that Shell would qualify to sign Pioduclion Sharing Contract (PSCs) for at least four blocks.
Meanwhile, the government has offered the most sought after Block 9 to Tullow Oil Plc of England which began negotiations on Wednesday.
Tile ■ ources described Tul-Jow’s pioposal for Blo< k-9 as unrealistic" and said it has proposed to drill 10 wells with an investment of 50 to 60 million US dollars. Tullow did not submit the required bank guarantee (at least 50 per cent of the investment) with its proposal.
The sources said that the government's reason for declar ing the "one block, one compa-
ny' formula was to ensure maximum participation in hydrocarbon exploration in the country. The ministry believes that maximum participation of foreign companies would remove chances of monopoly in hydrocarbon exploration. Such monopoly can create impact on the country's politics and economy.
This 'controversial' formula came after repeated attempts to increase the number of oil companies In the bid evaluation report. Sources said that the bid evaluation committee headed by a World Bank nominated international consultant had finalised the report on August 15. The report had disqualified proposals of some companies.
On that day. the Energy Ministry appointed three new members of the committee (three Petrobangla directors) and directed the committee to begin a re-evaluation of the 36 proposals submitted by 20 foreign companies and one local company.
The government then added some new criteria to the evaluation system. The new evaluation committee gave a report earlier this month which is similar to the first one.
"At this point, the government announced the one company, one block formula,” a source noted.
The "one company one block formula" is one that leaves room for awarding contracts to companies which are not capable.
There are other loopholes in the whole process that give companies scopes to manipu-* late and run away with quick profits without investing any resources, the resources said.