Petrobangla yesterday signed an initial agreement with Posco Daewoo Corporation for gas exploration in deep-sea block-12 in the Bay of Bengal.
Md Mahbub Sarwar, a director of Petrobangla, and Junggoo Junn, new venture exploration manager of the South Korean company, signed the production sharing contract (PSC) at the Petrobangla office in Dhaka.
Under the deal, Posco Daewoo will carry out a two-dimension (2D) seismic survey over an area of 1,800 kilometres in the first two years and 3D seismic survey over 1,000km in the third year.
In the fourth and fifth year, the Korean company will develop a well, according to a statement from Petrobangla.
The government approved the awarding of the block in October this year.
The copy of the agreement will now go to the law ministry for being vetted, and it will also require approval from the cabinet committee on purchase.
Petrobangla Chairman Istiaque Ahmad hopes the two sides will be able to sign a final agreement by the middle of 2017.
He said the Korean company is getting the gas block through an unsolicited process under the Prompt Power and Energy Supply (Special) Act-2010.
This was the first time a PSC was signed under the special act, which is applied to speed up the process of contract signing.
South Korean resource developer Posco Daewoo is engaged in the exploration of a gas block in the maritime area of neighbouring Myanmar. The block is adjacent to the block-12. Junn of the Korean company said Posco Daewoo discovered gas reserves in Myanmar in February this year.
The achievement has encouraged the company to agree to explore gas on the Bangladesh side, an official said. “As the company has found gas at the adjacent block, we might get good news from our block,” said Nazimuddin Chowdhury, energy secretary.
In February this year, Petrobangla sought expression of interest for three gas blocks -- DS-12, DS-16 and DS-21 -- and received proposals from Singapore-based KrisEnergy (Asia), Posco Daewoo and Norway's Statoil.
But when the final offer was sought from the companies, only Daewoo came up with a proposal for DS-12.
If commercially viable gas is found, Petrobangla will find its own portion as well as buy gas at $6.5 per 1,000 cubic feet, said Shahnewaz Parvez, deputy general manager for contract at Petrobangla.
Under the PSC, the provision of export has been kept. But Petrobangla Chairman Ahmad said Posco Daewoo will have to offer gas to Petrobangla first.
If Petrobangla refuses to buy, the Korean company will have to find buyers inside the country. Once the first two options exhaust, they can look for buyers outside the country.
Bangladesh's gas production averages 2,700 million cubic feet per day with demand running at more than 3,300 mmcfd, according to Petrobangla.
As the gas reserves are depleting with no new discovery, the government is awarding deep-sea blocks to international oil companies to boost production. The government also plans to import liquefied natural gas to meet the growing energy demand.
Posco Daewoo now produces 500 mmcfd of gas in Myanmar and South Korea, according to Junn.
Posco Daewoo estimates that the Myanmar gas fields have 4.5 trillion cubic feet of reserves, enough to cover three years of liquefied natural gas supplies to Korea, reported the Pulse News of Korea last month.
The report said Posco Daewoo hopes it could dig up similar yield from Bangladesh. The Korean developer hopes to expand exploration elsewhere in Bangladesh waters.