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Bangladesh considering ExxonMobil pitch to explore untapped deepwater hydrocarbon blocks

Highlights

Oil major in talks to secure exploration rights over all 15 deepwater blocks

Bangladesh considers revising contract terms to woo back global players

  • Author
  • Azizur Rahman
  • Editor
  • Wendy Wells
  • Commodity
  • LNG Natural Gas Oil Metals

Bangladesh is considering a proposal from ExxonMobil to explore the country's untapped deepwater hydrocarbon blocks under a new production-sharing contract model, as well as carry out oil and gas exploration in some onshore blocks, Petrobangla chairman Zanendra Nath Sarker told S&P Global Commodity Insights.

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ExxonMobil is also in talks with government officials to secure exploration rights over all 15 deepwater blocks situated in the Bay of Bengal, a senior official at the energy and mineral resources division of the Ministry of Power, Energy and Mineral Resources said, preferring anonymity.

The US firm in its proposal is seeking to first sign off of on a production-sharing contract before carrying out 2D seismic surveys within two years and then completing 3D seismic data acquisition, processing and interpretation within the next three years.

If awarded, it would be a key deal for Bangladesh as ExxonMobil would have to invest several billion dollars to delineate new reserves, which could boost the country's dwindling foreign currency reserves and help meet its growing appetite for energy.

Deepwater exploration in Bangladesh suffered a setback when South Korea's POSCO International exited block DS-12 in 2020 after seeking an extension of its PSC with better commercial terms, which Petrobangla refused.

Petrobangla had earlier awarded the DS-12 block along with two other deepwater blocks, DS-16 and DS-21, to a joint venture between the US' ConocoPhillips and Norwegian Statoil in a 2012 bidding round that backed out before inking production-sharing contracts citing unattractive commercial terms.

Revised terms

In a bid to woo back foreign investors, Bangladesh is set to offer international oil companies enhanced output share, and in future offshore exploration projects the right to export natural gas after meeting domestic demand.

Under new contracts, Petrobangla would purchase natural gas from foreign exploration contractors at more than three times the current price of around $2.75/MMBtu, hiking the price linking the same benchmark used to buy LNG without capping, a Petrobangla official said.

Under the proposed pricing formula, Petrobangla's offer price to international oil companies would be around $10/ MMBtu, considering the Brent crude price, which is hovering around $85/b.

In the draft model that is expected to be used in the next bidding round, Petrobangla has proposed reducing the government's share of "profit gas" to around 40%-70% from 55%-80% earlier. The new PSC model is expected to be approved by Bangladesh's cabinet committee on public affairs by end March, Sarker said.

Bangladesh currently has 26 open offshore and 22 onshore blocks. Fifteen of the offshore blocks are located in deep water and 11 in shallow water.

The country has PSCs for two shallow water blocks, SS-04 and SS-09, which are being explored jointly by India's ONGC Videsh Ltd. and Oil India Ltd.

Only four of the onshore blocks have been awarded to foreign companies; Chevron has been exploring and producing natural gas at three onshore blocks, while Singapore's KrisEnergy is producing natural gas from Block-9.