Bangladesh rejects Chevron's proposal
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Petrobangla rejects Chevron's offer, Photo: Collected
Petrobangla has rejected the proposal for an onshore contract under the terms of an offshore PSC (production and distribution contract). Multinational company Chevron had proposed a contract in the light of the model PSC in Block No. 11, consisting of Sunamganj, Sherpur and Mymensingh areas, and the extended area ofBlock-12 located in Habiganj.
The issue of oil and gas exploration in the area surrounding Block-8, Block-11 and Block-12 (Rashidpur) came to the fore in December 2023. A formal proposal was made by Chevron. At that time, the Awami League government rejected the Rashidpur issue and gave the green signal to Block-8 and 11 under the Special Provisions Act. At that time, they were asked to submit a detailed proposal.
Recently, Chevron Bangladesh made a new proposal. In that proposal, it proposed an agreement in light of the Offshore (Sea) Model PSC 2023. Petrobangla has rejected that proposal. It said that oil and gas exploration and extraction in deep sea is very expensive and risky, which is why the gas price there is very high. An agreement cannot be made according to that price on land.
Model PSC-2023 was revised with many concessions, including an increase in gas prices. Although gas prices were fixed in previous PSCs, this time the gas price has not been fixed. The gas price will fluctuate with the international market price of Brent crude. The price of gas per thousand cubic feet has been set at 10 percent of the price of Brent crude. That is, if Brent crude is $100, the price of gas will be $10. Which was fixed at $5.6 and $7.25 in the shallow and deep sea respectively in the existing PSC. On the other hand, Chevron Bangladesh has been leased the Block-12 area for $2.76.
Along with the price, the government's share ratio has also been reduced in PSC-2023. Bangladesh's share will fluctuate from 35 to 60 percent in deep sea and 40 to 65 percent in shallow sea. If the contractor does not find gas by drilling wells within the stipulated time or if it is not commercially extractable, there is an opportunity to increase the share by 1 and 2 percent respectively, subject to conditions.
State-owned Bapex has conducted a three-dimensional survey of a part of Block 11. The potential Block 11 is estimated to contain 2.47 trillion cubic feet of gas reserves. Chevron Bangladesh is scheduled to conduct two-dimensional and three-dimensional surveys in these blocks. If the survey results are positive, the company wants to move to the next stage (well drilling).
Multinational company Chevron Bangladesh is extracting gas from a total of 3 blocks. They have the Bibiana gas field in Block-12, the Jalalabad gas field in Block-13, and the Moulvibazar gas field in Block-14. 1125 million cubic feet of gas was extracted daily (January 28) from the 3 gas fields owned by Chevron Bangladesh. This is more than half of the total gas produced in Bangladesh. The total production of domestic gas fields on January 28 was 1905 million cubic feet.
According to the law, if no work is done for 7 years after the agreement, the area will automatically go under Petrobangla. Chevron Bangladesh signed the Block-12 agreement but later gave up some areas. In October 2022, the Department of Energy and Mineral Resources, Petrobangla and Chevron Bangladesh signed a tripartite supplementary agreement to drill wells in some areas vacated by the Bibiana Field. The company is trying to get some new areas in Rashidpur.
Several Petrobangla officials confirmed the matter on condition of anonymity, but none of them agreed to reveal their names. On the other hand, when contacted at the Dhaka office of Chevron Bangladesh, Manager (Media and Communication) Shaikh Jahidur Rahman told Barta24.com that Chevron Bangladesh cannot disclose specific future plans at this time.
He further said, "Chevron Bangladesh has been working with the government and Petrobangla for 30 years. It has been providing affordable, safe and reliable energy to Bangladesh. We want to continue exploring the potential of the energy sector."
Chevron was asked what they were thinking now after the proposal was rejected. In response to this question, Chevron Bangladesh cannot disclose specific future plans at this time.
Despite calling Petrobangla Chairman Rezanur Rahman multiple times, he did not answer. He did not even respond to SMS.
On the other hand, the Block-12 contract expires in 2034. Chevron Bangladesh had proposed to extend the contract by another 5 years to 2039. The proposal to extend the time was also rejected. Petrobangla believes that 2034 is a long time away, and it is not the time to decide on this matter now.
The company has been demanding payment of its outstanding gas bills in recent months. Development activities are being hampered due to outstanding gas bills and has written to the company to pay at least $75 million as soon as possible. The company's managing director and president, Eric M. Walker, wrote the letter on January 9. As of January 28, the company's gas bill outstanding amount stood at $170 million.