Bangladesh’s deep-sea oil and gas exploration has hit a roadblock, as no bids were submitted in the latest international tender, a situation industry experts attribute more to political uncertainty than economic concerns.
With a new elected government yet to assume office, the lucrative potential of offshore energy reserves remains untapped, according to officials and industry insiders.
At a time when domestic gas field production is declining, deep-sea reserves were seen as a beacon of hope.
In an effort to attract foreign investment, the government launched a highly publicised international bidding process.
Despite initial interest from multinational corporations, the complete absence of bids has cast doubt over the viability of the initiative.
Seven multinational companies had purchased bid documents, yet none proceeded with submissions.
A government-formed committee was tasked with investigating the reasons behind this reluctance.
While the official report outlines various economic and regulatory concerns, local representatives of foreign energy firms contend that the primary deterrent was political uncertainty.
Although companies tactfully avoided direct political references in their written statements, they highlighted other impediments.
Among the most enthusiastic contenders was the American oil giant ExxonMobil, which had been negotiating with Bangladesh since 2023 to lease offshore blocks.
Initially, the company had expressed interest in leasing all available blocks and had submitted formal requests.
Government officials previously stated that growing interest from foreign companies in Bangladesh’s offshore resources was a sign of confidence in the updated Model Production Sharing Contract (PSC).
ExxonMobil sought exclusive lease rights under special provisions, and multiple rounds of negotiations were held, yet no agreements were finalised.
When the tender was opened in March 2024, ExxonMobil, along with six other multinational companies, collected bid documents.
Even after an extension of the bid submission deadline by three months upon request from the companies, none proceeded with filing bids, leading to the cancellation of the tender.
In its response to the inquiry committee, ExxonMobil cited three major reasons for its withdrawal.
Firstly, the company found the gas price structure unviable.
The finalised Model PSC did not retain the price recommended by the consulting firm Wood Mackenzie Asia Pacific, which had proposed a gas price close to $10 per thousand cubic feet.
Instead, the final PSC linked the price to Brent crude at 10% of its value, a model that had previously set offshore gas prices at $5.6 and $7.25 per thousand cubic feet for shallow and deep-sea blocks, respectively.
Additionally, ExxonMobil objected to two other conditions: the absence of a waiver on transmission charges for pipeline transport from deep-sea wells to the mainland and the mandatory contribution to the Workers’ Profit Participation Fund (WPPF).
Current laws require foreign firms to allocate 5% of their profits to the WPPF, a provision that has been a long-standing point of contention between Chevron Bangladesh and local authorities.
Chevron Bangladesh, one of the companies that initially showed interest but ultimately refrained from bidding, also raised concerns over the WPPF clause in its written response.
Meanwhile, China National Offshore Oil Corporation (CNOOC) cited excessive costs imposed by Petrobangla for access to seismic survey data as a significant deterrent.
The inquiry committee’s report, confirmed by the Ministry of Energy and Mineral Resources, identified the lack of adequate seismic data as a major shortcoming.
The existing dataset consists of only 12,000 line kilometres of multi-client survey data.
Experts argue that acquiring an additional 23,000 kilometres of 2D seismic survey data would make offshore exploration more appealing to multinational corporations.
Petrobangla sources confirmed that over the years, companies such as ExxonMobil, Chevron, Malaysia’s Petronas, Norway-France joint venture TGS & Schlumberger, Japan’s Inpex Corporation and Jogmec, China’s CNOOC, Singapore’s KrisEnergy, and India’s ONGC had expressed interest in Bangladesh’s offshore energy sector.
Among them, Chevron, ExxonMobil, Inpex, CNOOC, and Jogmec had previously purchased multi-client survey data.
Following the resolution of Bangladesh’s maritime boundary dispute, the country secured ownership over 118,813 square kilometres of territorial waters.
However, despite the passage of several years, the nation has yet to reap the benefits of these newly acquired offshore resources. Bangladesh has 15 deep-sea and 11 shallow-water blocks.
Currently, ONGC is conducting exploration in two shallow-water blocks, but no progress has been made in the deep-sea zone.
The last tender for offshore exploration was issued in 2016, and while the Model PSC was updated in 2019, no fresh tenders were invited until 2024.
To incentivise multinational companies, the updated PSC linked gas prices to Brent crude, setting the price at 10% of crude’s market value per thousand cubic feet of gas.
Additionally, the government lowered its production share percentage, with a provision for gradual increases based on production volume. Despite these efforts, the complete lack of bids has raised concerns among policymakers.
Of particular worry is the delay in exploration, as neighbouring Myanmar has been extracting gas from adjacent offshore blocks for years, while Bangladesh continues to lag behind.
Maqbul E-Elahi Chowdhury, chair of the 2008 Model PSC drafting committee, told the press that increasing gas prices alone was never a guaranteed solution to attracting investors. “The failure to receive bids warrants a deeper analysis, especially considering that only seven companies even purchased bid documents,” he said.
He noted that certain clauses in the PSC may have deterred prospective bidders, particularly the requirement that only companies with a daily production capacity of at least 20,000 barrels (oil equivalent) could submit bids.
“This threshold excluded many potential firms. A more reasonable benchmark would be 10,000 barrels for deep-sea and 5,000 barrels for shallow-water exploration, which would significantly expand the pool of interested companies.”
Chowdhury further highlighted that when the 2008 Model PSC was being drafted, the original requirement was set at 15,000 barrels, but a foreign company had suggested raising it to 25,000, which was eventually enforced by the ministry.
Another major issue, he added, was the high cost of seismic data packages, some of which were priced in the millions of dollars.
“In other countries, these datasets are often provided for free. Back in 1974, Bangladesh had an open data-sharing policy, which resulted in much higher participation from global firms.”
Amzad Hossain, former managing director of BAPEX, questioned whether Bangladesh’s priority should be selling seismic data or ensuring energy security. “There is no justification for keeping data prices so high,” he remarked.
According to Petrobangla, Bangladesh’s approved gas supply capacity stands at 5,356 million cubic feet per day, while estimated demand ranges between 3,800 and 4,000 million cubic feet.
However, actual supply remains at only 2,800 million cubic feet per day, leaving a shortfall of nearly 1,200 million cubic feet.
Unless offshore exploration gains momentum, the country’s energy deficit is set to widen, compounding economic vulnerabilities.
