Posco Daewoo assigned for deep sea gas exploration in Bay of Bengal

State-owned Petrobangla on Tuesday entered into the final deal with Posco Daewoo International Corporation to award it the deep sea (DS) gas block -12 in the Bay of Bengal for hydrocarbon exploration.

Under the deal, the South Korean oil major will invest between $60-120 million in the next five years for conducting 2D and 3D seismic surveys in the block located in the deep sea area along the Myanmar border.

Posco Daewoo has already engaged in a gas block (AD-7) in Myanmar deep sea area which is within a same terrain having geographical condition.

“Posco Daewoo sees block DS-12 as most prospective as the company has made a big discovery in block AD 7 in Myanmar in the same sedimental basin where the block DS-12 is also located,” said Young-Sang Kim, the CEO of the Korean conglomerate, while addressing the contract signing ceremony at Petrobangla.

Prime Minister’s Energy Advisor Dr Tawfiq-e-Elahi Chowdhury, who was the chief guest at the function, said Posco Daewoo’s undertaking of gas block DS-12 will bring an opportunity to share each other outcomes of the exploration works in Bangladesh and Myanmar.

The function was also addressed by State Minister for Power and Energy Nasrul Hamid, Chairman of the Parliamentary Standing Committee and Power and Energy Tajul Islam, South Korean ambassador in Dhaka AHN Seong-doo, Energy Secretary Nazimuddin Chowdhury and Petrobangla Chairman Abul Mansur Md Faizullah.

Tawfiq Elahi Chowdhury said the government has taken a four-step initiative to develop the country’s energy sector which include onshore drilling, award of shallow and deep sea blocks and LNG import.

Nasrul Hamid said the government will award the next offshore block in the next year and also award contract for multi-client seismic survey.

Earlier, the Petrobangla and Posco Daewoo signed an initial agreement on December 7 last year which recently received the clearance from the Law Ministry and the Cabinet Economic Affairs Committee.

Officials said the Korean company was selected for the gas block through an unsolicited process under the ‘Prompt Power and Energy Supply (Special) Act-2010’ which means there was no open competitive bidding process in the selection.

They said the option for gas export was kept open in the proposed deal. After the discovery of any gas, the South Korean company will be allowed to export it once Petrobangla and local companies refuse to buy it.

“If Petrobangla refuses to buy the gas, Posco Daewoo will offer a third party within the country to buy it. If the third party refuses, then the Korean company will be allowed to export it,” said a top official of the Petrobangla referring to a provision of the proposed production sharing contract (PSC).

Official sources said the gas price was set at $6.5 per unit (1000 cubic feet) for the block. That means when there will be any discovery of gas, the government will get its own portion as part of the PSC. Similarly, the Korean company will get its own portion of gas and the government will buy its gas at this fixed rate.

As per the proposed contract, Posco Daewoo will conduct a 2D seismic survey and drill an exploration well in the first two years. If the block is found to be potential, the company will conduct a 3D survey.

International media reports said Posco Daewoo started commercial production of gas at Myanmar’s offshore blocks A-1 and A-3 in July 2013 and it has been exploring another natural gas well AD-7 after locating a large gas reservoir in February this year.

Source: Posco Daewoo assigned for deep sea exploration in Bay of Bengal

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