ConocoPhillips to wait for govt nod

M Azizur Rahman May 10, 2012

Petrobangla has asked the US oil giant ConocoPhillips to wait for a government decision over awarding it six new deep-water gas blocks in the Bay of Bengal for exploration of hydro-carbon resources, a top official said.

“We informed ConocoPhillips last week that a decision from the government high-ups is required to award six more deep-water blocks,” Petrobangla Chairman Hussain Monsur told the FE Wednesday.

During the discussion, ConocoPhillips sought exploration rights for six deep-water gas blocks, for which its bid was selected in 2008, but the contract could not be signed with it then as Bangladesh was in the midst of boundarydisputes with neighbours, Myanmar and India.

Earlier in March, the US firm had sent a letter, seeking exploration rights in the new deep-water gas blocks.

ConocoPhillips also informed the state-owned Petrobangla about its completion of 2D seismic survey in two deep-water gas blocks — DS-08-10 and DS-08-11.

The government awarded the two deep-water gas blocks to ConocoPhillips for partial exploration after a series of meetings, three years after the launch of the 2008 bidding round.

The US firm was initially selected by Petrobangla for exploration in eight deep-water gas blocks following the country’s February 2008 bidding round. And the energy ministry had then endorsed Petrobangla’s recommendation to award these blocks to the US firm.

But only two blocks were awarded to ConocoPhillips, in line with a decision by the Cabinet Committee on Economic Affairs.

Bangladesh, on March 14 last, won a favourable verdict against Myanmar from an international tribunal which upheld its claim to an exclusive economic zone of 200 nautical miles in the Bay of Bengal, and to a substantial share of the outer continental shelf beyond, thus ending its maritime boundarydispute with the neighbour.

As a sequel to this, the US firm will now be able to explore in the full area covered under the DS-08-11 block, said a Petrobangla official.

But it would have to wait for a verdict in the boundary dispute case between Bangladesh and India before the legal position over the second block becomes clear. This verdict is expected in 2014.

Of the six deep-water blocks that ConocoPhillips is now eyeing, four blocks – DS-08-12, DS-08-16, DS-08-17 and DS-08-21 — were in dispute with Myanmar and two — DS-08-15 and DS-08-20 — are with India.

Petrobangla is, however, not yet sure whether the ruling by the international tribunal clears the ownership dispute over the blocks with Myanmar as it has not received an official copy of the verdict, said the official.

He added that Petrobangla would be able to determine the latest position of the blocks soon after its scrutiny of the ruling by the International Tribunal for the Law of the Sea (ITLOS).

Meanwhile, if ConocoPhillips is awarded exploration rights for the six deep-water blocks, it will get a total of nine years to carry out exploration works, with five years as the primary exploration period and two years each for the first and second extended exploration periods, Petrobangla sources said.

ConocoPhillips will, however, not be able to export piped gas from these deep-water blocks in the event of discovery of gas there, but it will be able to export the gas as liquefied natural gas (LNG) form if Petrobangla and any third-party domestic user refuses to lift the gas, they said.

The price of gas sold from the blocks will be linked 100 per cent to high sulfur fuel oil prices, with the floor price set at US$ 70 per tonne and the ceiling, at $ 180 per tonne.

ConocoPhillips will be able to export oil after meeting the local demand.

As of now, the Australian Santos-operated Sangu gas field is the country’s lone operational offshore gas field.

International oil companies have been awarded only 14 hydrocarbon blocks — both onshore and offshore — since gas exploration began in the country in late 1960s. But they now hold only eight blocks, the rest having been given up.

According to experts, there are major gas reserves in the Bangladesh territorial waters of the Bay of Bengal and this assessment has been reconfirmed following massive discoveries by Myanmar and India in their respective areas in the Bay.