There has been little response to Bangladesh’s latest bidding round for offshore oil and gas exploration in the Bay of Bengal. No company participated in the bidding round that closed during the interim government’s tenure. The current government wants to avoid a repeat of that outcome.
The Energy Division is therefore making efforts to attract foreign investment in offshore exploration, holding direct meetings with various companies to gather their views. The deadline for submitting bids has already been extended by four months.
Sources at the Energy and Mineral Resources Division said separate meetings were held in London with 10 multinational companies on 29 and 30 September and 1 October. Discussions focused on the ongoing bidding round and the production sharing contract (PSC). The companies expressed satisfaction with the new PSC. They want to assess investment risks and the prospects of finding gas before deciding whether to participate in the bidding.
Two senior officials of the Energy Division told Prothom Alo that a delegation led by the state minister for power, energy and mineral resources attended the meetings in London. Meetings were also held with six companies in Singapore.
The government has given serious consideration to the views of multinational companies. It has therefore decided to make all available data on the Bay of Bengal’s hydrocarbon potential accessible to them. This will allow companies to examine the information and make informed investment decisions.
Amid the conflict in the Middle East, companies are exercising greater caution over investments. The bidding deadline has been extended for this reason as well.
Two senior Petrobangla officials said companies had conducted surveys as part of offshore exploration and submitted the resulting data. Six separate sets of survey data are available. Each set was priced at USD 1 million in the 2024 bidding round, while the price in the current round was USD 568,000.
Four sets of data have now been made available free of charge. The price of each of the remaining sets has been reduced to USD 5,000. Officials hope the move will encourage multinational companies to take an interest in the bidding. The companies will be able to analyse the data before deciding whether to invest.
Bangladesh has been facing an increasingly severe energy crisis for several years as domestic gas production continues to decline. Nearly a decade and a half after settling its maritime boundary disputes, the country has yet to discover a commercially viable offshore gas field.
The maritime boundary disputes with Myanmar and India were settled in 2012 and 2014, respectively. However, the previous Awami League government did not invite competitive bids for offshore exploration for more than a decade.
A bidding round was launched in March 2024, but that government fell in August of the same year. The interim government subsequently extended the deadline for bid submissions by three months. Although seven companies purchased bidding documents, none submitted a bid.
After taking office, the current government prioritised oil and gas exploration in the country. In May, it invited bids for exploration in 26 offshore blocks, including 15 in deep water and 11 in shallow water.
The original deadline for submitting bids was set for 30 November, with the bidding period running from 1 June. The deadline has now been extended to 31 March 2027.
According to Petrobangla, three companies had purchased bidding documents as of 25 October. Turkey’s Turkish Petroleum Overseas Company purchased documents on 23 July, while China’s CNOOC International did so on 17 August. Another Chinese company, Sinopec, purchased the documents last month.
None of these companies has previously participated in oil and gas exploration in the Bay of Bengal.
Sources at the Energy Division and Petrobangla said the companies consulted in London were among the world's leading oil and gas firms.
On 29 September, meetings were held with Murphy Oil of the United States, Petrobras of Brazil, Kuwait Foreign Petroleum Exploration Company (KUFPEC) of Kuwait, Geo Exploration of Australia, Union Energy Group of Singapore and Valeura Energy of Canada.
On 30 September, discussions took place with Italy’s Eni, US-based ExxonMobil and the United Kingdom’s BP. The final meeting, on 1 October, was with another leading company, the UK-based Shell.
Senior executives from these companies recommended making offshore survey data publicly available. They also requested more time to analyse the information.
Six Asian companies consulted in Singapore expressed similar views. Meetings are also expected to be held with several leading US companies in Houston early next year.
Anindya Islam Amit, state minister for power, energy and mineral resources, told Prothom Alo that the government had held direct discussions with multinational companies and sought their opinions. Discussions had also taken place with energy ministers from several countries, whose governments invest jointly with multinational companies.
“The deadline has been extended in response to market demand. The data has been made accessible and more readily available in line with the companies’ requests,” he said.
He expressed hope that the changes would generate a stronger response to the bidding round.
Bangladesh’s first offshore bidding round in 1974
Sources at the Energy Division and Petrobangla said the then Mujib government enacted a law on maritime boundaries in 1973. A bidding round for offshore oil and gas exploration was also launched that year.
Production sharing contracts were subsequently signed with six foreign companies. One of them, Union Oil Company, later renamed Unocal, reported a gas discovery in Kutubdia.
However, after the government led by Khondaker Mostaq came to power, all the foreign companies left Bangladesh.
Another bidding round was held in 1988, but no company participated.
Under the PSC-1994 framework, the government signed an agreement with British company Cairn Energy. The company discovered the Sangu gas field and began production in 1998. Gas production continued there until 2013, when operations were suspended because no commercially recoverable reserves remained.
In 2007, Australia’s Santos acquired shares from Cairn and took over operations at the field.
Under PSC-2008, US company ConocoPhillips signed an agreement and began deepwater exploration in 2010. The company left in 2015 after its demand for a higher gas price was not met.
Under PSC-2012, Australia’s Santos entered two shallow-water blocks in 2014, while India’s ONGC took up operations in two other blocks.
Santos announced its withdrawal from the region in 2020. South Korean company POSCO Daewoo entered under a special PSC in 2017 but also left after demanding a higher gas price.
ONGC was the latest company to withdraw, leaving last year. It drilled one offshore well but found no gas.
A draft PSC was finalised in 2019, but no bidding round was launched because foreign companies showed little interest.
Industry insiders said the Mujib government had a provision prohibiting foreign companies from appointing local agents. However, no such requirement was imposed in subsequent bidding rounds. At different times, influential local individuals acted as representatives of foreign companies.
Maqbul Elahi Chowdhury, a former member responsible for gas at the Bangladesh Energy Regulatory Commission (BERC), told Prothom Alo that 46 foreign companies had participated during Bangabandhu Sheikh Mujibur Rahman’s tenure. All relevant data had been made available free of charge at the time.
Seventeen companies also participated in 1994, he said.
“Bureaucratic complications have increased since then. Work that should take three days does not get done in three months. This discourages companies from participating,” he said.
Companies assessing investment risks
An analysis of the production sharing contracts shows that under PSC-2019, the price of gas was set at USD 7.25 per thousand cubic feet for deepwater blocks and USD 5.50 for shallow-water blocks.
PSC-2023 abandoned fixed prices and linked the price of gas in both deepwater and shallow-water blocks to 10 per cent of the price of Brent crude oil.
Under PSC-2026, the rates have been increased to 11 per cent for deepwater blocks and 10.5 per cent for shallow-water blocks.
As international oil prices rise or fall, gas prices will change proportionately. If crude oil reaches USD 100 per barrel, the price of gas from deepwater blocks would be USD 11 per thousand cubic feet.
However, the new contract will set upper and lower limits for the Brent-linked price over each five-year period to prevent gas prices from rising or falling excessively.
Under the agreement, the contractor will be responsible for building pipelines to transport offshore gas. The contractor will receive a tariff that takes into account gas reserves, supply and transportation costs.
This provision was absent from the previous PSC.
The formula for sharing profits between multinational contractors and Petrobangla has also been revised. If a contractor wishes to continue operations despite unsuccessful exploration, its share of profits could increase by one to two percentage points.
The interim government had previously introduced another incentive for foreign oil and gas exploration companies by amending labour laws. The companies’ contribution to the workers’ welfare fund was reduced from 5 per cent of profits to 1.5 per cent. Officials believe this could also encourage investment.
Several existing incentives have been retained. Imported goods will remain exempt from taxes and customs duties, while Petrobangla will pay income tax on behalf of contractors.
If Petrobangla does not purchase the gas, contractors will be allowed to sell it to third parties within Bangladesh. They will also be permitted to export gas if there is insufficient domestic demand.
Either party will be able to refer disputes to international arbitration.
In shallow-water blocks, the state-owned Bangladesh Petroleum Exploration and Production Company (BAPEX) will retain a 10 per cent participating interest.
Two officials who attended the meetings said the government had held direct discussions with several Asian companies following the London meetings. None of the companies had raised objections to the PSC. This is the best PSC so far in our history.
Every possible incentive has been offered. The price is almost equivalent to that of liquefied natural gas (LNG), one of the officials said.
The officials also believe that the presence of an elected government has helped build investor confidence.
However, companies will benefit from these incentives only if they discover gas. If exploration fails, they stand to lose their entire investment.
Multinational companies therefore tend to take more time when considering offshore investments.
Officials warned that another failed bidding round would have serious consequences for Bangladesh’s gas sector. The government is making every effort to increase participation by extending the deadline.
They said bidding rounds should be held regularly every year. Even if a company does not participate in one round, it may consider joining the next. Long gaps between bidding rounds, as in the past, should be avoided.
Energy expert M Tamim told Prothom Alo that much would depend on the international situation. Interest is high now because gas prices are elevated. But multinational companies will also consider future market conditions and examine the investment proposals available in other countries. They will assess the potential returns against the risks before making a final decision.
He added that it was difficult to predict how many companies would ultimately participate in the bidding round.