Petrobangla is set to begin offshore oil and gas exploration. An international bidding round will be launched on Sunday for exploration in 27 offshore blocks located in deep and shallow waters. To attract investment, various incentives — including export opportunities — are being offered to international oil and gas companies. Bid proposals must be submitted by 1:00 PM on November 30.
Although Bangladesh settled its maritime boundaries with neighboring countries, it has failed to extract mineral resources from those areas over the past 16 years. During this period, energy shortages and import dependency have increased.
Petrobangla Director (PSC) Engineer Md. Shoaib said that the draft contract had been revised after identifying why companies did not submit bids in the previous round. “We hope to receive a good response this time,” he said.
Blocks Offered for Bidding: According to Petrobangla, bids are being invited for 12 shallow-water blocks — namely Blocks 01, 02, 03, 04, 05, 06, 07, 08, 09, 10, 11, and 15 — and 15 deep-water blocks — namely Blocks 08, 09, 10, 11, 12, 13, 14, 15, 16, 17, 18, 19, 20, 21, and 22.
Export Opportunity: To attract investment, foreign companies are being offered several incentives. If oil or gas is discovered offshore, foreign companies will be allowed to export it. However, Petrobangla will receive priority purchasing rights. In other words, gas may be exported only if Petrobangla chooses not to purchase it. If neither Petrobangla nor local buyers are interested, the company may export the gas. Companies may also sell gas domestically to buyers other than Petrobangla.
Pricing Linked to Oil Market: Gas and oil prices will be determined in line with international oil prices, though both floor and ceiling prices will apply. For deep-sea blocks, gas prices will be set at 11 percent of the prevailing international crude oil price. For example, if crude oil is priced at USD 100 per barrel, gas will be priced at USD 11 per MMBtu. Even if international oil prices rise further, the gas price will not exceed USD 11. Likewise, the price will never fall below USD 7.50, regardless of how low oil prices decline. Therefore, gas prices will remain between USD 7.50 and USD 11. For shallow-water blocks, the maximum gas price will be USD 10.50.
Taxes to Be Paid by Petrobangla: Petrobangla will bear the personal income tax of foreign employees working under these contracts. Normally, foreign nationals employed in Bangladesh are required to pay taxes, but under this arrangement their taxes will be paid by Petrobangla.
Timeline: According to the draft contract, the exploration period will be nine years in total. Geological, 2D, or 3D seismic surveys must be completed within four years. Companies will then be given two years for drilling operations, followed by three years to move into production.
Mandatory Obligations: After signing the contract, the relevant IOC (International Oil Company) must conduct geological surveys. Conducting geological surveys has been made mandatory.
Bank Guarantees: After bid evaluation and award of the contract, the selected company must provide a USD 3 million bank guarantee before starting surveys. Before drilling wells, it must provide another USD 20 million guarantee. If oil or gas is discovered, an additional USD 20 million guarantee must be submitted before production begins.
Cost Recovery: Foreign companies will recover their investments from the sale of oil or gas. Investment costs must be recovered gradually, and no more than 75 percent of annual production revenue can be used for cost recovery in a year.
Profit Sharing: The remaining profit after cost recovery will be shared between Petrobangla and the foreign company. In shallow-water areas, Petrobangla’s share will range between 40 and 65 percent, while in deep-water areas it will range between 35 and 60 percent. The remaining share will go to the foreign company.
Import Duty Waiver: All equipment and materials imported for oil and gas exploration, development, and production activities will be exempt from customs duties.
Workers’ Welfare Fund: Under Bangladesh labor law, investors are generally required to contribute 5 percent of profits to the Workers’ Welfare Fund. However, these investors will only need to contribute 1.5 percent.
Pipeline Costs: If oil or gas is discovered, the investor will bear the cost of constructing pipelines for transportation. Factors such as distance, water depth, and the volume of oil or gas will be considered.
BAPEX Participation: A 10 percent stake has been reserved for BAPEX in shallow-water blocks. However, BAPEX will have no stake in deep-water blocks.
Contract Duration: Initially, contracts with foreign companies will be signed for 25 years for gas fields and 20 years for oil fields. The contracts may later be extended by an additional 10 years.
Petrobangla expects offshore gas exploration to begin by the end of 2027 after completing all necessary procedures.
A bidding round had also been launched during the tenure of the interim government. Although several companies purchased bid documents, none ultimately submitted proposals.