Lukewarm response to offshore bidding

Trackback URL

Download PDF

In a lukewarm response to the country’s first offshore bidding round, only six oil and gas companies submitted their bids yesterday for 16 out of 28 offshore blocks.

With a few offers overlapping different blocks, the oil companies offered to invest $1.6 billion. The bids included three offers for exploration in shallow water blocks.

The second round block bidding in 1998 generated offers from 22 oil companies, of which Shell Oil alone offered to invest over $2 billion.

The off-shore bidding round was announced in February with 20 deep sea blocks and eight shallow water blocks–each having exploration area cover between 3,000 square kilometres (sqkm) and 7,000 sqkm.

Only nine companies demonstrated seriousness by purchasing block data.

The oil companies submitted their bids until 1:00pm yesterday and the bids were opened after 2:00pm in the presence of representatives of the oil companies, officials and journalists at the Petrobangla seminar room.

“Twenty-five companies had purchased our promotional package and seven companies submitted bids. We are satisfied with the outcome,” said Petrobangla Director (PSC) M Muktadir Ali after the offers were opened.

Australian oil company Santos International appeared as the top bidder, making a total investment proposal of $852 million under three Production Sharing Contracts (PSCs) for six blocks. Santos has joint venture partnership with British company Cairn and Chinese-US joint venture Longwoods Resources and Shanghai Zhongman Petroleum (LR & SZP).

Santos faced stiff competition from US oil company ConocoPhillips that submitted offers in common blocks. ConocoPhillips offered to invest $442.63 million under four PSCs for eight blocks.

Chinese-US joint venture Longwoods Resources Ltd, in joint venture with LR & SZP, offered to invest $170 million in three blocks.

Cypriot oil company Comtrack Services offered to invest $61 million in two blocks under one PSC, Irish company Tullow Bangladesh offered $50 million in one shallow water block and Chinese oil giant CNOOC offered $115 million in one shallow water blocks.

A seventh company, Korea National Oil Corporation of South Korea, submitted a bid for a block along with a bank guarantee proposal of $2.5 million without making any investment commitment. It stated that it will conduct 1,000km of seismic survey but did not mention any expenditure.

Participants at the bid opening session were apparently surprised that oil giant Chevron did not participate in the bid although it purchased most block data from Petrobangla.

Muktadir Ali told the press that a bid evaluation committee has started working on the offers immediately and Petrobangla intends to sign all PSCs by October this year.

Some important features of the PSCs under this bid include full repatriation of profit, no signature bonus or royalty, and no duty for equipment and machinery imported for petroleum operations during exploration, production and development phases.

THE BIDS
ConocoPhillips offered four PSCs, each for two blocks. These blocks are 10 and 11, 12 and 17, 15 and 16, and 20 and 21. The US company offered to conduct 1,200 line kilometres of 2D seismic survey under each of the PSC in the initial operation period (IOP) of seven years. After the IOP, during the first extension of contract, the company promises to conduct 500 sqkm of 3D survey and drill at least one well under each of the PSCs.

Santos International proffered three PSCs, each for two blocks. These blocks are 10 and 11, 12 and 13, and 15 and 16. During the IOP for blocks 10 and 11 and 15 and 16, the company proposes 2,000km of 2D seismic survey, and 1,000 sqkm of 3D seismic survey. During the first and second extensions, the company proposes drilling four wells here. In blocks 12 and 13, Santos offers to conduct 2,400 km 2D seismic survey and 1,000 sqkm 3D seismic survey in the IOP and drill four wells in the first and second extension periods.

Both Santos and ConocoPhillips submitted bids for blocks 10, 11, 12, 15 and 16.

In shallow water block 03, Longwoods proposed 1,200 km 2D seismic survey and drill two wells in the IOP and conduct 1,500 km seismic survey and more than 500 sqkm 3D seismic survey in the follow up periods. In blocks 13 and 18, Longwoods also proposed conducting 1,200 km 2D seismic survey and 500 sqkm 3D seismic survey during IOP and conduct 1,500 km seismic survey and more than 500 sqkm 3D seismic survey in the follow up periods.

In blocks 9 and 14, Comtrack offered 1,200 km seismic survey in the IOP, 750 km seismic survey plus 500 sqkm of 3D seismic survey and drilling of one well in the first extension period and another in the second extension period.

In the shallow water block of 5, Tullow offers to conduct 570 km of seismic survey in the IOP, 700 sqkm 3D seismic survey and drill a well in the first extension period and 400 sqkm 3D survey in the second extension period.

In shallow water block of 1, CNOOC proposed seismic survey of 1,000 km each in three phases of the contract, totalling 3,000km, and drill two wells in the two extension periods.

LUKEWARM RESPONSE
This bidding is the first of its kind in the country where the focus is paid exclusively on the Bay of Bengal. India has heavily explored the Bay in recent years and has discovered 100 trillion cubic feet (tcf) gas and two billion barrels of oil in place. Even Myanmar in 2006 discovered 7 tcf gas in an offshore area which may be overlapping with Bangladesh maritime boundary.

Despite huge prospects, the bid failed to generate a lot of offers because of several factors, said a few Petrobangla officials.

Petrobangla has been preparing for this block round since 2006. But unlike the past bids, Petrobangla did not stage any road shows abroad to attract oil companies. In addition, presently some other countries are holding their own block bidding, which kept many oil companies pre-occupied.

Finally, there are doubts about maritime boundary of some blocks close to India and Myanmar.

Leave a Reply