ConocoPhillips-Statoil jt venture set to get its way

At long last, the joint venture of US oil major ConocoPhillips and Norway’s Statoil looks set to be awarded all three of the deep sea blocks in the Bay of Bengal it desires, with the Cabinet Economic Affairs Committee slated to consider their proposal in its meeting on Wednesday.

gasolinEarlier, the government’s decision was to award only two blocks to the US-Norwegian JV. But now the government seems to be backtracking from its earlier stance that no single company or joint venture will get more than two blocks in the deep sea.

According to official sources, the Energy Division last week accepted a proposal of the state-owned Petrobangla to award all three deep sea blocks (DS-12, DS-16 and DS-21) and forwarded it to the Cabinet Division for approval of the Cabinet Economic Affairs Committee (EAC).

The EAC, headed by the Finance Minister, is the highest approval body with the authority to decide on such important matters.

About the proposal, Energy Division secretary Abu Bakar Siddique said if the three blocks are awarded to the US-Norwegian JV, it will create greater scope for oil-gas exploration and production in the deep sea.

“That’s why this proposal needs a policy approval of the EAC,” he said in the executive summary sent for the Cabinet body.

Interestingly, it is notable that ConocoPhillips was earlier awarded two more gas blocks in the deep sea (DS-10 and DS-11) through an international bidding process in 2008.

But after initial exploration, it pulled out from the blocks without moving further to conduct any development work, which irked the government about the company.

“As a result, there is no exploration or production deal with the US oil major,” said a top Petrobangla official who deals with the matter.

But when the Petrobangla invited international bidding in 2012 for deep sea blocks, ConocoPhillips tied up with Norwegian Statoil to form a joint venture (JV) company—named “ConocoPhillips Asia Pacific New Venture and Statoil ASA” and submitted bids for the three gas blocks.

But in the meantime, the government took a stance that no single company or JV could get more than two blocks in the deep sea. But the US-Norwegian JV emerged as the lone bidder for the three blocks, which has led directly to the latest turn of events.

Industry insiders say, if the EAC approves the US-Norwegian JV offer, it will be the “final step back” for the government’s stance.

Officials said when the Petrobangla offered the US-Norwegian JV only two blocks instead of their desired three, they disagreed.

Finally, the Petrobangla accepted the US-Norwegian JV offer for three blocks as per instruction from the government’s highest policy making level.

In its bids, the US-Norwegian JV has offered drilling of one mandatory well in each deep sea block and also 872-775 line kilometer 2D seismic survey for each block, for in total eight years of exploration.

As per new terms of condition of the PSC, the price of gas has been fixed at $6.5 per 1000 cubic feet (MCF) and the price will annually be increased by 2.0 percent.

It means, Petrobangla will buy the company’s shared gas at this price which was earlier $5.5 per MCF.

The company will be allowed to sell 50 percent of its cost recovery and profit gas to any local company at any negotiated price without any permission from the state-owned Petrobangla.

The company does not need to pay any corporate tax. Rather, Petrobangla will pay corporate tax on its behalf.

The company will also get the opportunity to use Petrobangla’s gas pipeline without paying the existing 4 percent transmission charge.