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Need expediting offshore petroleum exploration

The energy security of Bangladesh continues to remain vulnerable for issues relating to uncertain supply scenario of primary fuel resources.

Own natural gas still dominates our fuel mix and recoverable reserve of proven gas resource is fast depleting.

There is no encouraging signs that own discovered coal resource will be exploited soon. All projects of coal and LNG import have already in the cycle of prolonged delays for different reasons.

Very little exploration activities have been carried out over the last 15 years though gas demand increased exponentially.

Energy experts observed that Bangladesh consumed over 8.25 Trillion cubic feet (Tcf) natural gas since 2000 against which only about 1 Tcf new gas could be added.

The situation has already created chronic deficit in national gas grid. All end users including power, Fertilizer, industrial and domestic consumers are adversely affected from gas shortage. 

"The situation has already created chronic deficit in national gas grid. All end users including power, Fertilizer, industrial and domestic consumers are adversely affected from gas shortage."

Nasrul Hamid, State Minister for Energy in the national parliament stated that at the present rate of use own natural gas will be completely deplete by 2030 if now major gas reserve is discovered  soon.

The present gas production capacity is 2740 MMFCD. The deficit is over 600 MMCFD.

In not too distance future gas production will start reducing as many well head pressure of many wells are already depleting. Bangladesh desperately needs expediting its exploration campaign for petroleum in onshore and offshore.

Onshore has not very bright prospect of finding major new reserve .But experts believe there is huge potential for finding significant new resources in offshore especially in deep water. Bangladesh achieved a large area almost the size of Bangladesh in the offshore from resolution of maritime boundary disputes with neighbors Myanmar and India.

But it is really frustrating that the present exploration initiative continues to remain inadequate. BAPEX given exclusive right for exploration in onshore also could not achieve major success for its restricted technical and financial capabilities.

Bangladesh planned to import 500 MMCFD equivalent LNG in 2010 through setting up FSRU at Maheskhali. The original plan was to start supplying LNG to gas starved Chittagong market by end 2012.

But unfortunately till end December the physical implementation for FSRU has not started yet.

Daily Gas Production: 15-16 November 2015

Companies

Gas Fields

Gas Wells

Production Capacity (MMCFD)

Actual Production

3 Petrobangla Production Companies (BGFCL, SGFL and BAPEX)

16

 62

1120

1105,9

2 IOCs ( Chevron & Tullow)

 4

 39

1620

1627.3

Total

20

101

2740

2733.2

  • Source : Daily Gas Production & Marketting Report ,Petrobangla

A review of the production report evidence that of the 20 gas fields 4 (Titas, Habiganj, Bibiyana and Jalalabad) produce about 2240 MMCFD of the total 2740 MMCFD. Well head pressure of most of wells are depleting showing alarming signs .Gas supply security is truly vulnerable.

What Went Wrong With Exploration?

The country witnessed hardly any mentionable exploration activities after 2000. Very conservative strategy of successive government regarding engagement of IOCs in exploration in onshore and lack of initiative in offshore exploration led to no major discovery for over 15 years.

National company BAPEX was given exclusive right for exploration in onshore outside of the blocks already awarded to IOCs with assessing the technical and managerial capability of BAPEX. These resulted in discovery of some marginal gas fields over this period.

On the other hand poor perspective planning kept gas demand increasing exponentially .Even little action was taken for ensuring efficient use of gas. Fertilizer plants, power plants and industries wasted huge volume of gas from inefficient use causing irreversible impacts on gas security.

The initiatives for offshore bidding round failed to attract potential IOCs alleging lack of proper fiscal and financial incentives in model PSC. The protracted process of PSC negotiation approval also discouraged IOCs in risking investment in Bangladesh offshore.

Conoco Philips the lone IOC signing PSC relinquished the blocks arguing for gas price increase after carrying out surveys and giving apparent indications of finding some resources. The request of Santos for letting them develop Kutubdia gas field along with Magnama and Hatiya was not entertained.

A matured potential joint Venture of an IOC with BAPEX failed to get approval for further exploring some potential gas structures in the greater Chittagong area. Government also did not listen to experts on time plea for opening onshore blocks to PSC bidding.

Petrobangla invited bids for carrying out multi-client surveys in offshore, evaluated bids and recommended awarding the contract to the lowest evaluated bidder.

After wasting several months the advice was to retender .The process is now delayed for a year as survey in the Bay of Bengal can only be done from November to March. There is no chance that Fresh Offshore bidding can be launched before mid to late 2017.

The evaluation and award will take to end 2018. It may take till 2026-27 to get any benefit of deep water discoveries. In the meantime Bangladesh will need to develop own capacity of managing implementation of deep water subsea pipelines. Bangladesh struggles in operation of onshore high pressure gas installation now.

We had opportunity to review the updated Model PSC 2012 in presence of senior Petrobangla professionals last year in Australia. A day long in depth technical analysis of various aspects of model PSC evidenced that unless major updating is done the model PSC will not attract major IOCs as it cannot lead to win-win agreement.

No genuine IOC will risk investing billions of dollars without assured prospect of rate of return from fiscal and financial incentives.

It is double standard in the sense that Bangladesh hesitates 8-9 US$ per unit price of deep water gas though it has no issues in importing US$14 LNG import. Bangladesh must not burden potential IOCs with making BAPEX carried over partner.

Bangladesh gas demand will increase to around 4000 MMCFD by 2030. Our present reserve will almost deplete by that time if no new major reserve is added by that time .Bangladesh cannot afford to rely exclusively on imported LNG for fueling its gas based industries from 2030.

The requirements are

  • Letting out PSC bidding round immediately in onshore frontiers outside ring fenced blocks of BAPEX
  • Concluding JV of BAPEX and selected IOCs for further exploring prospects in the greater Chittagong area
  • Update model PSC2012 and let out PSC bidding for Offshore simultaneously to fresh bidding to multi-client survey. The selected IOC will definitely carry out their own surveys before committing billions of dollars in exploration.

Post COP21 may lead to a situation when Natural gas whether pipeline gas or LNG will be favored fuel option for Bangladesh. Hope policy makers and planners appreciate that situation and take appropriate action without wasting time.

Engr Khondkar A Saleque is a former director (Operation) of GTCL, Petrobangla.

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