Bangladesh has approved a plan by Russian gas major Gazprom to drill 10 wells in the country, Petrobangla Chairman Hussain Monsur said Wednesday.
The country's Cabinet Committee on Government Purchases late Tuesday approved the awarding of 10 onshore drilling contracts to the company, he said. "We will sit with Gazprom officials shortly to finalize negotiations before inking a deal over the drilling program," Monsur added.
Outstanding issues included a framework for compensation in the event of a blowout and the payment of insurance premiums, he added.
Gazprom in late October offered to drill 10 onshore gas wells on a turnkey basis at a total cost of $193.55 million, with drilling to be completed within 18 months of approval being granted. It agreed to pay 5% of the total cost as a performance guarantee.
Gazprom and Petrobangla officials have held several rounds of talks in the past two years over the Russian company's entry into the oil and gas exploration sector in Bangladesh. Gazprom will be the first foreign company to partner with Petrobangla in exploration without a production-sharing contract.
Under the work plan, Gazprom will drill five development wells in the Titas and Rashidpur gas fields and five exploration wells.
Titas, owned by Petrobangla subsidiary Bangladesh Gas Fields, is Bangladesh's second largest gas field, producing around 444,000 Mcf/d of gas. Rashidpur, owned by Sylhet Gas Fields, produces around 48,000 Mcf/d.
Gazprom will also drill five exploration wells in four gas structures -- Begumganj, Shahbazpur, Semutang and Sundalpur -- owned by Bangladesh Petroleum Exploration and Production Company Ltd., or Bapex.
Petrobangla offered the development of the wells to Gazprom without tender after Polish oil and gas explorer Poszukiwania Nastyi Gazu Krakow backed out after being selected in a competitive tender in 2012.
The government recently passed a new law to ensure the quick implementation of power and energy projects that bypasses the tender process. It gives it the authority to bypass any laws that impede the execution of power projects and prevents decisions and deals inked under the new law from being challenged in court.
This has allowed the government to negotiate directly with Gazprom and award contracts to drill gas wells without a tender process.
Bangladesh's natural gas production presently hovers around 2.04 Bcf/d against the demand at more than 2.5 Bcf/d.
The shortfall has forced Petrobangla to suspended new gas connections to industries since July 2009, squeezing industrial growth. Gas rationing is widespread and CNG filling stations are closed four hours a day.
Bangladesh urgently needs new energy supplies to feed the growing economy, which has been expanding at an average 6% a year since 2003.
Petrobangla projected earlier that unless new gas fields are discovered, supplies will start diminishing from 2011 and reserves will run out by 2014-2015 at current rates of consumption.
