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No to offshore gas export

New PSC offers explorers higher sale price; fresh ojfshore block bidding likely next month

Sharier Khan
Companies exploring oil and gas in the Bay in future will not be allowed to export gas.
Under a new model production sharing
contract (PSC) approved yesterday, the companies will, however, get higher price than in the past for selling oil and gas to the government, Petrobangla sources said.
FROM PAGE 1
The PSC for offshore block bidding round 2012 was approved by the Cabinet Committee on Economic Affairs yesterday at a meeting chaired by planning ministerAK Khandker.
“Now that the PSC has been approved, we hope to finalise documents and float an offshore block bidding by October,” said a top official ofPetrobangla.
He mentioned that Petrobangla has already drafted an acreage map of 12 offshore blocks including three deep sea ones opposite the Myanmar maritime boundary.
As part of the bid, Petrobangla plans to hold a pre-bid meeting in Dhaka inviting interested oil and gas companies.
“We had a lack of serious participants in the 2008 offshore block bidding. Most of the bidders lacked confidence because of the maritime boundary dispute with Myanmar and India. Now that we have resolved the Myanmar boundary issue, we are cautiously optimistic about a good participation this time," said the Petrobangla official.
The model was modified in the light of the experience of 2008 offshore block bidding as well as the present international trend, and protection of environment.
In the new PSC, some major changes from the 2008 model PSC include fixing the floor price of high sulphur fuel oil (HSFO) at $100 a barrel as against $70 previously, and ceiling price at $200 from $180, considering the international oil price trend.
The new PSC also includes an offshore gas structure of Kutubdia discovered earlier but left out of the previous offshore bidding. Kutubdia structure is complex and segmented,
making it a risky and costly exploration or development zone.
Considering the high oil price in the world market, the new PSC asks the contractors to pay Petrobangla’s PSC Research Fund US 10 cents per barrel instead of three cents previously on the contractor's share of profit gas and condensate every year.
The operating contractor will have to follow a certain direction to change ownership of a block. There is no specific guideline now.
To finalise this model, two inter-ministerial meetings were held at the energy ministry in February and April. The draft was then vetted by the law minis try.
Following the 2008 block bidding, the government could sign just one PSC with US Company Conoco Phillips to explore two deep sea blocks - 280 km off Chittagong.
Petrobangla sees its next bid as a test case. “Based on the response that we get from the upcoming bid, we can tell the government whether our model PSC is competitive and attractive enough and whether we need to put some more incentives to attract oil companies,” said a Petrobangla source.
He notes that banning gas export will not be a disincentive. “The present PSC has the provision of exporting gas in the form of liquefied petroleum gas (LNG). To export LNG, the bidder needs to find a massive field and invest several billions of dollars.
That provision is almost as good as a total ban," the source said, adding, “On the other hand, the oil companies are getting a better sale price offer under the new PSC, which is a big incentive.”