Indian gas exploration cos seek price review from Petrobangla

India's hydrocarbon-exploration companies ONGC Videsh Ltd and Oil India Ltd sought review of the gas price from Petrobangla and urged it to make it a market based one.

Bangladesh has PSCs for two shallow-water blocks-SS-04 and SS-09 -- which are being explored jointly by India's ONGC Videsh Ltd and Oil India Ltd.

Petrobangla had signed contracts with the operator of shallow- water offshore blocks SS-04 and SS-09, on February 17 in 2014, which expired in February 2019.

"Now, ONGC is arguing that the recently approved Model PSC 2023 offered the price of gas that linking with same benchmark used to buy expensive liquefied natural gas (LNG) without any cap, which is definitely marked based," Energy Division official said.

He said, according to their argument, under the new PSC, the corporation will purchase hydrocarbons from exploration contractors at more than three times the current price of around US$2.75 per million British Thermal unit (MMBtu) as it is linking the price with same benchmark used to buy expensive liquefied natural gas (LNG) without capping.     

Under the proposed pricing formula, the corporation's offered buying price to IOCs will be around $7.6 per MMBtu as per the current global Brent crude price at $76 per barrel.

Moreover, in the model PSC, which is expected to be used in the next bidding round, the Petrobangla has proposed to fix the hydrocarbon price at 10 per cent of the three-month average Brent crude price, so they (ONGC) wants a price review as this PSC is designed for the offshore bidding, a very similar areas of work with ONGC, the official added.

Earlier, ONGC Videsh Ltd (OVL) has sought extension of its contract tenure for three times for different causes, Petrobangla has also amended some clauses of the production-sharing contract (PSC) between the OVL and state-run Petrobangla earlier as they failed to appoint a drilling contractor due to high cost quotes.

"We need to do that as we reel from energy shortages. Our main objective was to extract hydrocarbon," a senior official of Energy Division said.

ONGC Videsh Ltd (OVL) is contractually pledge- bound to complete the drilling of two more wells- Titly in block SS-04 and Moitree in block SS-09. The company has a budget to complete drilling both the wells at a cost of $65 million, and deposited a handsome amount as "guarantee money."  

"The Indian firm is yet to engage in any drilling contractor as the latter is seeking higher- than- expected drilling costs," the official said.

It sought extension of the PSC tenure with the hope that the contractors will demand less drilling costs after several months with the easing of current global energy- market turmoil, he added.

However, ONGC failed to discover any gas in Kanchan gas well in Bangladesh's shallow-water gas- block SS-04. It plugged and abandoned the well subsequently, stating that there was no find.

The OVL, the operator of blocks SS-04 and SS-09, has participating interests of 45 per cent, Oil India Ltd (OIL) holds 45 per cent participating interests and the Bangladesh Petroleum Exploration and Production Company Ltd or BAPEX holds the remaining 10 per cent. The Block SS-04 covers an area of 7,269sqkm while the Block SS-09 stretches over an area of 7,026sqkm. Water depth of both the blocks ranges between 20 and 200 metres.

As per the PSC, the OVL is committed to conducting 2,700 line-kilometre 2D seismic data-acquisition and-processing and one exploratory well in Block SS-04 and 2,700 line-kilometre 2D seismic data-acquisition and-processing and two exploratory wells in Block SS-09.

The firm will be allowed to operate and sell oil and gas for 20 years from an oilfield and 25 years from a gasfield. It has already completed around 3,100 line-kilometre 2D seismic surveys for both the blocks.