Gas price hiked by onshore PSC!
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Photo: Collected
Petrobangla has finalized the draft of onshore PSC (Production and Sharing Contract). There are indications that the gas price for the block in the hilly area may be as high as 8 dollars(1,000 cubic feet).
The proposed price is as low as 2 dollars compared to imported LNG, and as high as 5 dollars compared to the previous agreement with multinational companies (Chevron and Tallo).
Chevron Bangladesh is paid 2.76 dollars per thousand cubic feet of gas, while the agreement with Tallo is around 2 dollars. Petrobangla buys gas from the works of three state-owned companies in addition to multinational companies. Sylhet Gas Field Company and Bangladesh Gas Field Company are paid around Tk. 28 per thousand cubic feet, while Bapex is paid around Tk. 112.
On the other hand, the price of LNG imported from Qatar in the first 7 months of the 2024-25 fiscal year was 10.66 dollars and the price of LNG imported from Oman was 10.09 dollars.
The draft PSC of the consultant company was reviewed in a joint meeting. Petrobangla officials, officials of the Energy and Mineral Resources Division and Bapex officials participated in it.
An official who participated in the meeting, on condition of anonymity, told Barta24.com that the draft presented 3 types of price formulas. It is proposed to link it with the price of Brent crude oil. That is, if the price of Brent crude increases, the price of gas will increase, and if it decreases, it will decrease. Although the consultant company proposed to make it 9.5 percent, there was discussion about capping it in the joint meeting. There may be a formula so that even if the price of crude increases by many, it will not exceed 8 dollars.
On the other hand, in the offshore PSC, the price of this gas has been kept equal to 10 percent of the crude. Due to the impact of the Ukraine war, the price of crude oil had reached 140 dollars per barrel which is currently close to 70 dollars.
Petrobangla Chairman Rezanur Rahman told Barta24.com, Onshore PSC is being done mainly targeting the mountainous areas. Some observations have been made on the draft of the consultant company Wood Mackenzie. They will update them and submit the draft. We are trying to do it very quickly.
In response to the question of how much the gas price is being determined, the Petrobangla Chairman said, the fixed price cannot be said right now. However, it will be lower than the offshore PSC.
In response to another question, he said, yes, of course, capping can be done because the international energy market is very unstable. So that if the price increases too much for some reason, there is no pressure. And so that investors are not harmed if it decreases too much.
Petrobangla sources said, it has been proposed to keep 10 percent of Bapex's shares here. Bapex will not make any investment in the future. If gas is found, they will invest 10 percent of the capital. That is, there is no risk of BAPEX. If they get gas, they will get a share of the profit by investing capital.
PSC-2023 has been finalized with many concessions, including an increase in the price of gas from the model PSC-2019. The price of gas per thousand cubic feet has been set at 10 percent of the price of Brent crude. That is, if the price of Brent crude is 80 dollars, the price of gas will be 8 dollars. In the previous PSC, the price was fixed at 5.6 dollars and 7.25 dollars in shallow and deep sea, respectively.
After the offshore PSC, the issue of onshore PSC came up for discussion. The tender for onshore blocks 22 and 22(a) (hilly area) is being finalized on the model of that PSC. Since there is not enough information about the Chattogram Hill Tracts, it is difficult to extract oil and gas, building roads, and constructing pipelines if gas is found is expensive. Therefore, it is known that the price is being increased a lot compared to the past onshore PSC.
The first well was drilled in the hilly region of Bangladesh in 1914 (Sitakunda) by the Burma Oil Company. Then in 1922, a well was drilled in Patharia. After that, about 12 wells have been drilled, the last well was drilled in Halda (1998). Of these, gas was found in Semutang 1, 2, 3 and 4, but it was reported that it was not commercially extractable. Information was received that there was little reserve in any other well, and no gas was found in Halda, Semutang-5, and Patiya.
In the report on Semutang-4 well, Keyan said that the reserve is very low, the investment in the pipeline will be expensive. It will be difficult to raise the investment. A 50 MW power plant can be built in the well area.
There are various politics regarding Bangladesh's gas resources. At one time it was said that the country is floating on gas, and at another time it was said that there is no gas and it has to be imported. Due to this political game, the exploration activities can still be said to be in limbo. The first well was drilled in Bangladesh in 1911. In 114 years, about 99 exploration wells have been drilled. Internationally, if 10 wells are drilled and gas is found in one, it is considered successful. In Bangladesh, 29 gas fields have been discovered out of 99 exploration wells drilled. That is, the success rate is three to one. Although Bangladesh's success rate is high, many now think it is a sham.
The 1995 Energy Policy called for drilling 4 exploration wells per year. But no government has been able to come close to that target. At one time, up to 2800 million cubic meters of gas was extracted. As reserves have decreased, production in many wells has decreased. Currently, domestic production has come down to 1870 million cubic meters.
