Petrobangla has dismissed a proposal from multinational energy giant Chevron, which sought to apply offshore Production Sharing Contract (PSC) terms to an onshore gas exploration deal in Bangladesh.
The proposal encompassed Block-11, covering Sunamganj, Sherpur, and Mymensingh, along with an extension of Block-12 in Habiganj.
The matter first emerged in December 2023 when Chevron formally submitted its proposal for oil and gas exploration in areas adjacent to Blocks 8, 11, and 12, particularly Rashidpur.
At that time, while the Awami League government rejected Rashidpur's inclusion, it granted initial approval for Blocks 8 and 11 under special provisions, pending further details from Chevron.
PSC Model Discrepancy Leads to Rejection
Chevron recently revised and resubmitted its proposal under the terms of the 2023 offshore PSC model, which replaced the 2019 framework.
However, Petrobangla dismissed the bid, asserting that offshore and onshore gas contracts could not share identical pricing models due to cost variations.
Offshore exploration and extraction are significantly more expensive and risk-prone, justifying higher gas prices in those regions, which do not apply to onshore projects.
The 2023 PSC introduced a pricing structure linked to Brent crude oil rates, unlike previous models where fixed gas prices were pre-determined.
Under the new terms, the price per thousand cubic feet of gas is set at 10% of Brent crude’s price.
For instance, if Brent crude trades at USD 100 per barrel, the gas price would be USD 10 per thousand cubic feet.
In contrast, earlier PSCs had fixed prices of USD 5.60 for shallow waters and USD 7.25 for deep waters.
Meanwhile, Chevron's existing lease in Block-12 currently operates at a price of USD 2.76 per thousand cubic feet.
In addition to price adjustments, the 2023 PSC reduced the government’s share of gas production.
Under the new model, Bangladesh's stake fluctuates between 35-60% for deepwater fields and 40-65% for shallow waters.
Contractors failing to commence drilling or achieve commercial viability within the stipulated timeframe are subject to an increment of 1-2% in the government’s share.
Chevron's Existing Operations and Future Plans
Chevron Bangladesh currently operates three gas fields—Bibiyana in Block-12, Jalalabad in Block-13, and Moulvibazar in Block-14—collectively producing 1,125 million cubic feet of gas per day as of 28 January.
This accounts for over half of the country’s total gas output of 1,905 million cubic feet on that date.
State-owned BAPEX recently conducted a three-dimensional seismic survey in part of Block-11, estimating a gas reserve of 2.47 trillion cubic feet.
Chevron Bangladesh has also proposed two-dimensional and three-dimensional surveys in various blocks, intending to proceed with drilling if findings prove commercially viable.
Disputed Contract Extension and Payment Issues
Chevron’s existing contract for Block-12 is set to expire in 2034, and the company had proposed an extension until 2039.
However, Petrobangla rejected the extension, stating that sufficient time remains before a decision is necessary.
The energy giant has also pressed the government for the settlement of outstanding payments.
On 9 January, Chevron Managing Director and President Eric M Walker sent a letter urging the government to clear at least USD 75 million immediately, citing disruptions to development activities due to unpaid dues.
As of 28 January, Chevron’s total outstanding gas bills stood at USD 170 million.
Official Responses and Silence from Petrobangla
Several officials from Petrobangla, speaking on condition of anonymity, confirmed the rejection of Chevron’s proposal but refrained from making official statements.
Meanwhile, attempts to reach Petrobangla Chairman Rezanur Rahman for comment proved unsuccessful, as he neither answered calls nor responded to text messages.
Chevron Bangladesh Media and Communications Manager Sheikh Zahidur Rahman stated that the company does not wish to disclose its future plans at this moment.
However, he emphasised that Chevron has been collaborating with the Bangladesh government and Petrobangla for over 30 years, ensuring a steady supply of affordable, safe, and reliable energy.
The company remains committed to exploring further opportunities in the energy sector.
With the rejection of its latest proposal, Chevron’s next course of action remains unclear.
However, the energy major continues efforts to secure additional exploration rights in Rashidpur and other areas within Block-12.
