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IOC interest in our gas reserves a good sign

ExxonMobil proposal should be considered with calculated speed
One of the largest and most renowned oil companies in the world recently expressed interest in exploring Bangladesh’s deep offshore blocks for gas and oil. According to media reports, ExxonMobil, a US-based international oil company (IOC), has submitted a proposal for petroleum exploration in all 15 deep sea blocks located in Bangladeshi territory, supposedly investing around $3 billion during the initial exploration phase. ExxonMobil suggested that the deep sea blocks be offered to the company so it can begin exploration immediately. The company also suggested that it would participate in the upcoming offshore bidding round for the shallow-water blocks.
Observers in the energy sector, as well as insiders from the Bangladesh Oil, Gas and Mineral Corporation (Petrobangla), opine that Bangladesh should utilise this opportunity and initiate negotiations in terms of engagement with this well-experienced and technically robust oil company.
ExxonMobil’s proposal has come at a time when Bangladesh is facing serious gas shortage in its own reserves. The country’s offshore gas exploration has been stalled for many years. Local gas production has been on a decline since 2016. To cover the gas shortage, Bangladesh had to buy from the liquefied natural gas (LNG) market, known for its volatile and unstable price trends. The LNG price hike at certain points last year rendered the fuel temporarily unsustainable for Bangladesh. Given the situation, it is not clear why the government stayed away from major offshore block biddings for more than a decade.
Bangladesh’s offshore region, comprising a major part of the central Bay of Bengal, is globally known for its high hydrocarbon potential. It has 11 shallow-water blocks and 15 deepwater blocks. Of these 26 blocks, two are leased out to Indian company ONGC Videsh Ltd. While there is little to no exploration in the Bangladesh part of the Bay, the scenario is different on the Myanmar and Indian sides. Both the countries have conducted extensive exploration with significant success in finding gas in their respective parts in the Bay.
The excuse that government high-ups in Bangladesh have been using – saying that the IOCs have shown no interest in exploring the country’s offshore reserves – has been proven wrong. Companies like ConocoPhillips, Santos Ltd, Posco Energy, and TotalEnergies have expressed interest in exploring our offshore blocks. They conducted initial exploration, but did not continue because of disputes on fiscal terms with Bangladesh. ConocoPhillips, on the basis of seismic survey, delineated several prospective structures, among which it wanted to drill two in the deep offshore blocks 10 and 11, but left the country because of disagreement on gas prices. Similar issues arose with Santos and Posco.
In these cases, Bangladesh’s stand on the gas price – that one may not ask for an increase in the price outside of the contract – is understandable, but the overall outcome has been unfavourable for the country. By not agreeing to raise the gas price to $9-10 per unit, which the companies asked, Bangladesh lost an opportunity and later ended up having to purchase LNG from the spot market at $20-35 per unit!
It is clear from ExxonMobil’s interest – the company sought the right to explore all of the deepwater blocks in Bangladesh – that our offshore region, especially the deep sea area, is an area of interest to the IOC. The company is also contemplating entering a competitive bidding round for the shallow-water blocks, too. It is well-known that renowned IOCs have access to information more than others, and they build a good enough knowledge base on an area that it intends to explore for gas and oil.
ExxonMobil likely has the data to judge the merit of exploring Bangladesh’s offshore blocks. Offshore drilling, especially deepwater drilling, is very costly, requiring $60-100 million per well, compared to the cost of drilling an onshore well, which is $10-15 million only. Understandably, when an IOC decides to take on such an expensive exploration venture, it is likely to know what it’s doing.
What is so special about ExxonMobil? The answer to that question is probably best explained by Anthony Simpson in his bestselling book The Seven Sisters . Simpson describes the world’s petroleum scenario in the 1940s and 1950s, showing how poverty-stricken Middle Eastern countries, including Saudi Arabia, Kuwait, etc, turned into superrich nations through the discovery of huge amounts of underground petroleum resources. And seven of the most powerful IOCs at that time – whom he calls the seven sisters – employed their machineries, talent, and fortune to unearth the vast reserves of oil in the Middle East. These companies included Exxon, Mobil, British Petroleum, and Shell. Exxon and Mobil later merged together and started running their exploration ventures across the world.
After a long break, Bangladesh decided to launch an offshore bidding round in December last year. A model production sharing contract (PSC) has been revised and all documents have been prepared for approval from the ministry. But due to bureaucratic tangle, files are moving much slower than expected, delaying the launch of the bidding round repeatedly. As of March this year, the date is yet to be announced.
One thing that Bangladesh does not have on its side is time. Prolonging a process may be the bureaucratic norm here, but IOCs tend to operate on a fast-track basis and often find it frustrating to wait for a decision for too long. Bangladesh does not have offshore drilling capabilities and has to depend on IOCs right now. If the government is serious about extracting its own offshore gas, it must take a faster route of action.