ConocoPhillips seeks deepwater gas price revision  

A ConocoPhillips-led joint venture is seeking to revise production sharing contracts for three new deepwater blocks offshore Bangladesh to allow a 2%/year gas price rise to kick in before first production begins, a company official said Thursday.

“We have proposed the escalation of the gas price begin earlier than at first production, which is similar to what is in place in neighboring countries like Myanmar and Thailand,” ConocoPhillips managing director for Bangladesh operations Tom Early said.

gasolinThe joint venture between ConocoPhillips and Norwegian Statoil is currently in talks with the Bangladeshi government and state-owned Petrobangla after being evaluated as technically fit to be awarded three new deepwater blocks—DS-12, DS-16 and DS-21.

The country’s Energy and Mineral Resources Division or EMRD of the Ministry of Power, Energy and Mineral Resources has subsequently proposed offering the JV two of the three blocks.

“We have proposed [awarding] them two deepwater blocks instead of three for signing PSCs,” EMRD Secretary Md Abu Bakar Siddique said Thursday.

In response, the JV has sought to have the start date of the annual gas tariff revisions included in the PSC brought forward.

“It will take quite a few years to achieve first production from a deepwater development and fixing a gas price today for such an extended period will threaten the economic viability of the project,” Early said.

“The ConocoPhillips/Statoil joint venture continues to look forward to the award of all three blocks and to commencing exploration on these blocks as soon as possible.”

The annual 2% hike in gas prices from first gas production was one several revisions made by Petrobangla to attract international oil companies to participate in the country’s 2012 bidding round.

The price of gas from the new deepwater blocks has been pegged to high sulfur fuel oil prices, with the floor price for HSFO fixed at $100/mt and the ceiling price at $200/mt, and calculates to around $6.50/Mcf.

The ConocoPhillips-Statoil JV has committed to investing $327 million exploring the three blocks for eight years in two phases.

ConocoPhillips in mid-December ceased operations at two other deepwater blocks in Bangladesh, DS-08-10 and DS-08-11, due to poor fiscal terms, after backing out of signing a deal for shallow water block SS-07 in April after deeming the fiscal terms unviable.

Bangladesh has been trying to develop offshore resources in the Bay of Bengal but has made little progress so far. It is currently dependent on onshore fields for all its domestic gas output.

The country’s gas production is currently around 2.46 Bcf/d against demand for more than 3 Bcf/d

-platt.com

 


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