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Santos still seeking Kutubdia gas field exploration rights: energy ministry official

Highlights

Australian oil and gas exploration company Santos is still seekingexploration rights for the offshore Kutubdia gas field in the Bay of Bengalafter its earlier attempt to get the rights was rejected, an energy ministryofficial said Friday.

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As a result of this, Bangladesh's energy ministry is to hold a meetingwith state-owned Petrobangla soon on the issue,the official said.

The official said awarding the offshore field to Santos could take lesstime than awarding it to a new contractor.

Santos was initially seeking to develop the field along with the nearbyoffshore Magnama structure in 2013. But Petrobangla decided to offer it forcompetitive bidding in the licensing round in October, Petrobangla ChairmanHussain Monsur said earlier.

Kutubdia along with another discovered offshore gas field Teknaf would beoffered under "special packages," he had said.

Although Santos has said earlier that it would wind up it Bangladeshoperations, a change in Petrobangla's decision on Kutubdia could see itcontinuing operations in the country, the ministry official said.

Meanwhile, Santos on Monday served a 90-day notice to Petrobangla about wrapping up operations, Platts reported earlier.

It also has urged Petrobangla to take over the offshore Sangu platform,processing plant, pipelines, and other infrastructure within 90 days.

The company's exit plans were attributed to a combination of a poorperformance at its Sangu-11 gas well in block 16 in the Bay of Bengal and itsinability to get exploration rights for Kutubdia, which would have madefurther exploration in block 16 commercially viable.

Santos entered Bangladesh in November 2010 when it took over UK-basedCairn Energy's interests there, which included block 16 and the Kutubdiafield.

The company later relinquished its rights to Kutubdia as it found the PSCterms unfavorable and decided to focus instead on the offshore Sangu gasfield in block 16.

The company drilled a new well -- Sangu 11 --in the Sangu field as theother wells ran out of gas, and brought it on stream in June this year.

The company was able to proceed with developing Sangu-11 after it wonrights to bypass Petrobangla and sell the gas directly to Bangladesh PowerDevelopment Board at $4.50/1,000 Mcf, a rate that was 55% higher than thefixed gas price for other fields win Bangladesh.

Sangu-11 is currently supplying 23,000 Mcf/d, down from its initialproduction rate of 30,000 Mcf/d. Once its output falls to 15,000 Mcf/d, thewell will no longer be economically viable, Santos officials said.

Moreover, the well is expected to run out of gas in two years.

Santos and its predecessors Cairn and Shell invested over $ 1.0billion in block 16.

A Santos official September 25 conceded that "the overall [Sangu]project had not been profitable." He added that Santos was no longerinterested to continue its Bangladesh operations as the offshore Sangu-11 gaswell would not be economically viable for long and with no access to Kutubdiait saw no opportunity to drill in the Magnama structure in block 16 and makefurther investments in Bangladesh.

Santos Bangladesh President John Chambers had earlier indicated thatwithout rights to Kutubdia Santos would have to reconsider its investmentplans in Bangladesh.

The Kutubdia gas field was discovered in 1977 and has recoverable gasreserves of around 45.5 Bcf, according to Petrobangla estimates.

In addition to owning 100% of the Magnama and Hatiya structures in block16, Santos has a 75% stake in offshore Sangu together with HalliburtonEnergy, which has a 25% stake.

--Mohammad Azizur Rahman, newsdesk@platts.com
--Edited by Elston Soares, elston_soares@platts.com