DHAKA (Reuters) - State-run Bangladesh Oil, Gas and Mineral Corporation clinched a preliminary deal with U.S. firm ConocoPhillips on Sunday for oil and gas exploration in the Bay of Bengal, subject to signature of a production sharing agreement.
“We have chosen the U.S.-based firm for the exploration of natural gas in the offshore field,” Mohammad Hossain Monsur, chairman of the company, also known as Petrobangla, told Reuters. “The production sharing contract will be signed very soon.”
ConocoPhillips will start seismic surveys and exploration around two deepwater gas blocks after signing the PSC, he said.
The deal, concluded after two years of talks, is intended to address acute gas shortages, with production hovering at around 2,000 million cubic feet per day against demand of about 2,500.
The government forecasts that current gas reserves will run out by 2014-2015 at the present consumption rate.
The shortages have prompted the government to shut down fertiliser plants, suspend operation of compressed natural gas filling stations for six hours a day and introduce staggered holidays in industry.
ConocoPhillips will invest about $111 million and has offered a bank guarantee of the same amount for the two blocks. Energy officials say it may take five years for the blocks to yield results.
Signature of the PSCs has been held up by a parallel dispute with neighbouring Myanmar and India, which have claimed partial ownership of several offshore blocks.
Exploration around the two blocks is to take place in areas unaffected by territorial disputes. Bangladesh is holding talks with both countries to settle maritimes and has filed a case with the International Court of Justice in The Hague.
Others bidding for the blocks included Britain’s Tullow, Australia’s Santos International, Longwoods Resources Limited, Korean National Oil Corp, China’s CNOOC and Comtrack Services Limited of Cyprus, Monsur said.
Bangladesh’s proven gas reserves are 7.3 trillion cubic feet (tcf) and probable reserves are 5.5 tcf. ($1=70.35 taka)