The Energy Division has sent a proposal to the Cabinet Economic Affairs Committee to approve a deal with Posco Daewoo International Corporation for deep sea block DS-12 for oil and gas exploration.
Petrobangla, the state hydrocarbons agency, has already signed an initial deal with the South Korean company for the block on December 7 last year.
Officials said once the Economic Affairs Committee approves the Energy Division’s proposal, Petrobangla will sign the final deal. After that, Posco Daewoo will start physical work on DS-12.
Official sources said the government has allowed an option for Posco Daewoo to export some of the gas, although not before the government exercises its right to first refusal, and other Bangladeshi actors also refuse, in the proposed deal.
The government processed the proposal of Posco Daewoo under the ‘Prompt Power and Energy Supply (Special) Act-2010′ which means there was no open competitive bidding process in awarding the contract.
Since gaining sovereignty over the waters of all three blocks (DS-12, -16, -21) through a landmark ruling by a UN court in 2012, Bangladesh has been looking to engage the international oil companies in exploring them.
But it has been a history of repeated failure, particularly in the absence of any reliable seismic data pertaining to this swathe of the Indian Ocean, to indicate the potential it held for profitable investment.
In the event of discovery of any gas, the South Korean company will offer Petrobangla to buy its portion of gas to be obtained under production sharing contract (PSC), according to the export provision.
If Petrobangla refuses to buy the gas, then Posco Daewoo will offer a third party within the country to buy it. If the third party refuses then the Korean company will be allowed to export, explained a Petrobangla official, who requested anonymity.
As per the proposed contract, Posco Daewoo will conduct a 2D seismic survey and drill an exploration well during the first two years.
If at that point there is potential for gas found, the company will proceed with a 3D survey.
South Korean resource developer Posco Daewoo Corporation, which has been engaged in exploration of a nearby gas block in the maritime area of neighboring Myanmar, expects to develop offshore gas fields at Bangladesh’s deep sea gas block-12.
The deep sea block 12 is located near the Thalin-1A gas exploration well at block AD-7 of Myanmar, that the Korean resource developer succeeded in discovering gas reserves in February this year.
Considering similar geographical features as the block AD-7, energy experts think there is a good chance that the block 12 of Bangladesh would contain similar gas reserves.
International media report said Posco Daewoo started commercial production of gas at Myanmar’s offshore blocks A-1 and A-3 in July 2013