Several international oil companies (IOCs) have explained their reluctance to submit bids for Bangladesh’s deep-sea oil and gas exploration, despite purchasing tender documents, said Petrobangla sources.
Multiple companies among the seven that bought the tenders have communicated their reasons via email, the state-owned company said.
Key concerns raised include the wheeling charge for pipelines from deep sea to land, the Workers’ Profit Participation Fund (WPPF), and the high cost of data, alongside the country’s political situation.
According to Bangladeshi law, a designated amount must be allocated to the WPPF, a point of contention for some IOCs, which argue against such financial obligations.
Bangladesh launched a grand call for tenders to explore oil and gas in the deep sea before the recent shift in political power.
Although seven multinational companies bought the tenders, none submitted bids by the extended deadline.
In response, Petrobangla has formed a committee to investigate the lack of participation.
This committee reached out to the seven companies, seeking feedback. Several responded, providing their perspectives.
The tender, issued on 11 March, covered 24 blocks (15 in deep sea and 9 in shallow sea) within Bangladesh’s maritime boundary.
The submission deadline was extended from 9 September to 9 December.
Notably, despite purchasing tenders, no bids were received from the seven renowned international firms, including Exxon Mobil.
Consequently, the tender was declared void.
The committee, led by the PSC Director Altaf Hossain, is tasked with understanding why these companies abstained. The PSC director indicated that detailed explanations from the companies are being requested.
Among the reasons cited, political instability and high data costs were prominent.
The IOCs were also dissuaded by the profit-sharing model, despite adjustments to make the Production Sharing Contract (PSC) more attractive.
Previously, gas prices were fixed, but the new model aligns them with Brent crude prices, set at 10% of Brent's rate per thousand cubic feet, which was an improvement from the earlier rates of $5.6 and $7.25 for shallow and deep sea respectively.
Further, the profit share ratio for Bangladesh was adjusted to fluctuate between 35% to 60% in deep sea and 40% to 65% in shallow sea, based on production levels.
However, these modifications failed to attract sufficient interest.
Mokbul E-Elahi Chowdhury, head of the 2008 PSC drafting committee, remarked that higher gas prices alone were not enough to entice more bidders.
He suggested revisiting the eligibility criteria, such as reducing the minimum daily production requirement for potential bidders to 10,000 barrels in deep sea and 5,000 in shallow sea.
Amjad Hossain, former managing director of BAPEX, questioned the rationale behind the high cost of data packages, some reaching millions of dollars.
He argued for a focus on securing gas rather than profiting from data sales.
Petrobangla has revealed a daily gas demand of 3,800 to 4,000 million cubic feet against an approved load of 5,356 million cubic feet for eight consumer categories.
Currently, only about 2,800 million cubic feet are supplied daily, leaving a shortfall of approximately 1,200 million cubic feet.
Data for the 2023-24 fiscal year shows an average daily supply of 2,493 million cubic feet, raising concerns as domestic gas field production continues to decline.
This stagnation in exploration, attributed to past government preferences for imports over domestic exploration, remains a significant challenge.
