The Telegraph
Wednesday , February 19 , 2014
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PSU duo in Bangla oil hunt

New Delhi, Feb. 18: State-owned Oil and Natural Gas Corporation (ONGC) and Oil India Ltd have signed a production-sharing contract with Bangladesh to explore two offshore shallow water blocks in the Bay of Bengal.

This is the first time that Indian companies have been given a contract by the South Asian neighbour to explore hydrocarbon reserves in its territory.

Bangladesh’s Petrobangla has inked two production-sharing contracts with ONGC Videsh Ltd and Oil India — the Indian duo have set up a joint venture with equal shares — for the SS-04 and SS-09 blocks that they had won in the oil and gas auction.

Under the contract, ONGC Videsh-OIL will have the right to explore Bangladesh’s first discovered offshore gas field Kutubdia as well. Kutubdia was offered under a “special package” and was tagged with the SS-04 block in the bidding round.

ONGC Videsh-OIL have committed to spend $58 million on block SS-04 and carry out 2,700 km 2D seismic survey, 200 sq km 3D survey and drill two wells during the contract period.

For block SS-09, the partners have agreed to spend $85 million and conduct 2,850 km 2D seismic survey, 300 sq km 3D survey and drill three wells.

ONGC Videsh and Oil India had submitted bids for these two blocks, out of the nine offered by Bangladesh in the latest bidding round in December 2012.

Under the profit-sharing arrangement, Petrobangla will get 70-90 per cent of oil and condensate and 60-85 per cent of extracted natural gas.

The contractors will be allowed to operate and sell oil and gas for 20 years from the oil field and 25 years from a gas field.

Bangladesh now produces 2,300 million cubic feet of gas per day against the demand of 2,700mcfd from 2.5 million customers. The demand is growing by about 10 per cent a year.

Wellhead gas prices in Bangladesh are pegged to high-sulphur fuel oil prices (HSFO) in the international market, while oil prices are determined on the basis of a fair market value.

Under the contract the floor price for HSFO has been fixed at $100 per tonne and the ceiling price at $200 per tonne.