Is it true that Bangladesh does not have enough financial strength to explore and extract gas in the Bay of Bengal?

• The cost of offshore drilling is on average about 1 billion dollars per well. But this is spaced out over at least 6-7 years, so about 1000 crore taka each year. But the government already pays 4000 crore taka each year to IOCs as subsidies for gas and electricity. By that estimate, it may be argued that the government can simultaneously explore and extract gas from four wells with the same amount of money it pays IOCs through earlier contracts.
• Moreover, Petrobangla gave the govt. around 3300 crore taka on 2008-09 FY alone as tax, VAT and profit share. Therefore, if we use a local company to withdraw gas, we will get the necessary capital from the profit-share and tax on the gas itself. Even if that is not possible, levies, loans, shares and bonds may be used to raise the start-up capital - however, since exploration is somewhat risky, raising money for this from the public may not be simple.
• According to private sector representatives, the private sector of Bangladesh (e.g. banks) now is able to finance such large scale projects. Several private corporations like Summit Group and PHP Glass have already offered to finance such projects.

Is it true that Bangladesh does not have enough technical expertise to explore and extract gas in the Bay of Bengal?

• BAPEX at the moment does not have the capacity to independently explore and extract gas in deep sea, because it simply does not possess the equipment and training.
• But historically it has a higher efficiency record (2.25:1) in onshore explorations compared to IOCs (3:1), although it could be because BAPEX is likely to be more risk-averse than IOCs.
• Even large companies achieve most tasks using sub-contractors. In the short term, BAPEX could supervise subcontractors to do the exploration, and through a process of technological transfer, in the medium to long term BAPEX could develop the capacity to conduct explorations itself.
• Government needs to invest only a few hundred crore every year on BAPEX (or let BAPEX invest its own earned capital) to upgrade its capacity. However, in the past, the government has often delayed, and sometimes not given BAPEX such small amounts of money.
• Expertise has to be developed. Petronas and Petrobras were in the same situation as us 20 years ago, but are now oil giants.

We need immediate solution to the shortfall of energy. Will PSC 2008 help in that regard?

• Most likely not. Any extraction of gas from offshore reserves will take 5 to 7 years. We must look for other alternatives (raising efficiency, increasing extraction from existing onshore reserves, exploring and harnessing newonshore reserves, using coal to produce electricity, developing renewable energy, etc.) to meet immediate demand for energy.

• The current shortage of about 235 MCF (July 2009). There are 4 old wells which can produce enough gas to meet current shortage within 5-6 months just by workover drilling (cost ~ 35 crore taka). There are 3 other onshore wells which can be developed within 2 years  to produce enough gas for the next 6/7 years, and another 4 entirely new potential wells that have huge production potential (all data from BAPEX AGM reports).

What does the PSC 2008 stipulate about the distribution and ownership of gas?

Since, according to the PSC2008, the first right of refusal remains with Petrobangla, is there really a danger that gas will be exported?

Petrobangla will have to 1) set up infrastructure to transport gas, and 2) use the amount of gas provided

• Whereas Bapex was not provided 14.2 million dollars for buying a drilling rig, and we could not build a pipeline from Kutubdiabetween 1974 and 2009, we cannot possibly expect the govt. to provide 200/400 million dollars for deep sea pipeline. Also, even if we build the pipeline, Petrobangla can claim only 20% of total gas.

• The interest of the contractor company is to extract as much gas as early as possible to make the maximum profit (There is no limit to the amount of gas extraction for offshore operations). Bangladesh doesn’t have the capability, not the plan, to expand industries in a way so as to absorb the amount of gas that can be extracted. IF that plan was there, government wouldn’t have allowed export while there is such dearth of fuel already. SOLUTION: Impose limits on extraction per year, responsibility for pipeline and transportation is the company’s, and the company will be liable to set up electricity plants and industries to use the gas (like Barapukuria).

If Bangladesh buys gas from the IOC, how much will the government have to pay?  Does Bangladesh have the capacity or adequate industrial demand to buy gas from the IOCs at international market rates?

How much gas is estimated to be found? Who did this estimation? Does Petrobangla know what is the current demand for gas, what the future demand will be, and how much is the shortage?

How will the gas be brought to Bangladesh? How much will the pipelines cost to build and maintain? Who will pay for it?

The previous gas-related PSCs did not bar export but gas was not exported. Given that background, is there a danger that gas will be exported under the terms of PSC 2008?

Is it credible that the government could not attract IOCs without the export clause?

There are arguments that no real effort has been made to explore whether IOCs could be attracted without export clause. There are counter-arguments that this is an internally recognized practice to allow export for deep sea exploration since the risks and costs are higher than for onshore exploration.

What is the basis for Petrobangla to decide what percentage to keep and what percentage to export? What is the process of reaching this decision? What is the process of making it known to the public?

Who has access to the geological survey to estimate the possible, probable, proven and the recoverable gas? 

Were there breaches of contract with previous PSCs? What did the government do about those breaches?

Is reserve a function of price?

What’s the difference between having a foreign company exploring and a local company exploring?

How can we generate revenues without exporting? 

What are some of the international experiences with respect to offshore exploration and extraction?