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Download PDF The government’s attempt to float the third round bid for oil and gas exploration in the Bay of Bengal in October is likely to fall flat due to ‘bad timing’, sources said.
After remaining inactive for five years in the field of major exploration, the government recently made a lot of exercises concerning the third round bid.
The energy ministry is hoping that the cabinet will soon approve its proposal to float the third round bid in 26 blocks in the bay. The ministry started the process for the bid late last year.
But sources said this attempt is ‘impractical’ as the follow-up lengthy process of selection and negotiation for the bidding will not end even during the tenure of the next caretaker government, and continue when a new government takes over after the coming general elections.
“Investors would not be interested to spend money to participate in a bid that will see rapid changes of government,” said a top official.
“Besides, the third round bid will exclusively focus on exploration in the Bay of Bengal. But we do not have any clear marking of deep sea borders with India and Myanmar. This creates another serious uncertainty for potential bidders.”
He went on, “In addition, we know very little about the bay. When oil companies will seek existing data, we have little to offer them.”
The government last year considered floating a tender for a speculative survey of the Bay of Bengal. This survey would have helped the government identify exploration blocks on the basis of energy potentials and get a primary impression on geological aspects of the bay. But the idea never got matured, and a senior cabinet member opposed the move when a vested interest lobby put pressure to award the deal to a certain company.
The government in its recent exercises, which includes updating the model PSC (production sharing contract), is considering revision of the incentive package for investors.
The previous incentives included exemption of corporate tax. This puts heavy financial burden on Petrobangla that pays 40 per cent corporate tax on behalf of the oil companies. “We are trying to drop this incentive and instead give the investors 10-year tax holiday,” said one official.
The government is also updating the standard for bidder’s minimum commitment of work programme and incorporated the provision of abandonment of exploration activities in the updated PSC.
The proposed blocks are of around 24,000 square kilometres. Some parts of at least two blocks may be disputable as India has floated its sixth round oil and gas block bid, in which at least two blocks are visibly situated within Bangladesh waters. The bid closes on September 15.
The other major issue for Bangladesh is the accidental discovery of oolite carbonate rocks in the coastal waters during a scientific survey in June-July. Oolite carbonate rocks hold oil potential. Proper survey of that area might give Bangladesh further understanding of the potential, which can help the country bag a better deal from bidders.
The then BNP government in the early nineties floated the first round block bid. But at that time there was no open tender, and the government signed a PSC with British company Cairn and two PSCs with American company Occidental. The negotiation process lingered for around three years.
The Awami League government floated the second round bid in 1998. For the first time, it was open and competitive. But the negotiations lingered for three years as some influential quarters within the government tried to award PSCs to lesser qualified companies.
“The point is, behind the formalities, all negotiations need strong political will. And it also demands time,” an official pointed out.
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