The Bangladesh government on Tuesday signed a deal with South Korean firm Posco Daewoo Corporation to lease an offshore block for gas and oil exploration.
Under the contract, Posco Daewoo will explore deep sea block 12 (DS 12). If gas is found in the block, the company will sell 1,000 cubic feet of gas at $6.5.
The contract is a first of its kind in the country as Posco Daewoo has been selected directly under under the Speedy Supply of Power and Energy (Special Provision) Act, 2010 instead of traditional tender procedure.
Deputy Secretary of the Energy and Mineral Resources Division Khadiza Naznin signed on behalf of Bangladesh government while Syed Ashfaquzzaman, Secretary of Petrobangla and Si Bo Joo, Senior Executive Vice President of Posco Daewoo signed on behalf of their respective organisations at a simple ceremony held at Petrobangla building in Dhaka.
The deal was initially inked for five years with a scope of extending it up to another three years. As per the deal, the South Korean company will conduct exploration at 1,000-2,000 meter depth in 3,560 square kilomtere area in block-12.
Daewoo will conduct a 2D and 3D survey in the first three years and will go for drilling wells in fourth and fifth years. Petrobangla will get 65%-90% profit on oil and 60%-85% profit on gas if those are found in the block-12.
The Korean company was selected for the gas block through an unsolicited process under the under the Speedy Supply Act, which means there was no open competitive bidding process in the selection.
Under the provision, if oil or gas is found in the block, the company will first offer Petrobangla to buy a portion of the findings, to be obtained under production sharing contract.
If Petrobangla refuses to buy the oil and gas, Posco Daewoo will make the offer to other companies in Bangladesh.
If the other companies reject the offer as well, the South Korean company will have the liberty to sell the oil or gas to foreign companies.
Nasrul Hamid, State Minister for Power, Energy and Mineral Resources said, “We have also taken initiatives to drill 108 new wells. By 2018, drilling works will be conducted in 28 wells.”
The State Minister said that the there is no point of worrying about the energy security. “The government will ensure energy security on time.”
Nasrul said the government is importing LNG and increasing LPG for saving natural gas and supplying it to industries.
Terming this deal a ‘landmark’, Tawfique-E-Elahi Chowdhury, Energy Advisor of the Prime Minister Sheikh Hasina said that this deal open up the scope of off-shore exploration after the historic maritime boundary win.
Posco Daewoo is engaged in exploration of gas in the maritime area of neighbouring Myanmar.
Bangladesh`s gas production averages 2,700 million cubic feet every day with demand running at more than 3,300 mmcfd, according to Petrobangla.
Tajul Islam, Chairman of the Parliamentary Standing Committee on Ministry of Power, Energy and Mineral Resources, Nazimuddin Chowdhury, Secretary of Energy and Mineral Resources, Abul Mansur Md Faizullah, Chairman of Petrobangla and Young Sang Kim, CEO of Posco Daewoo were present at the occasion.