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Change Your Life! |
BAPEX under pressure |
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News |
March 28, 2000
The Energy Ministry is pushing the Bangladesh oil and gas exploration company BAPEX to sign a production sharing contract (PSC) with a Canadian company that seeks unusually high profit and other options inconsistent with the Model PSC.
The Canadian company, Nico Resources, which was disqualified in the Second Round Block Bidding in 1997, has proposed to jointly develop and produce gas from three already discovered gas fields at Feni, Kamta and Chhatak, owned by BAPEX and Petrobangla. Niko is seeking 90 percent share. Niko is seeking 90 percent share, offering only 10 percent to BAPEX.
The gas fields were discovered by Petrobangla but 'abandoned for various reasons.
Nico has proposed a gas purchase and sale formula which will make gas costlier for Bangladesh, source said.
Niko proposal will be placed in the BAPEX board today for approval, they said.
The Model PSC of the government outlines a gas pricing formula based on six months' average price of high sulfur fuel oil (HSFO) in Singapore market. The model PSC determines the 'ceiling price' of (HSFO) in Singapore market. The model PSC determines the 'ceiling price' of HSFO at 120 dollars per ton and the floor at 70 dollars.
But Nico has proposed a ceiling price of 140 dollars per ton and a floor price of 70 dollars, the sources said.
"In fact, no other PSC operation in Bangladesh, despite taking risks in exploration unlike Nico, is seeking such high price," said a source commenting on Niko's proposal.
After approval by the BAPEX board, Nico's proposal will be sent to the Petrobangla board, Nico's proposal will be sent to the Petrobangla board for further processing.
Promoted by a strong political lobby, Nico last year submitted a joint study proposal to the government to assess the status of the three gas fields.
As soon as Nico submitted its study proposal, the Energy Ministry instructed BAPEX to initiate a Memorandum of Understanding (MOU) with it for a joint venture agreement to study, develop and produce gas from the three gas fields.
Despite BAPEX's reluctance to go for a joint venture or a joint study with a 'weak' company like Nico to assess its own gas fields, the Energy Ministry continued to hammer on a joint venture deal without assessing the benefits, the sources said.
Nico conducted a joint study of the gas fields with a financial grant from Canadian aid agency CIDA and took two BAPEX officials to Canada to complete the talk.
"Nico's involvement is almost risk-free because there are already adequate data on these gas fields. In contrast, other PSC operators in Bangladesh are taking a lot of risks in their exploration activities," observed and official.
Besides, the existing PSCs with other oil companies ensure high profit margin for Bangladesh. There is no reason why BAPEX should get 10 percent share, instead of 90 percent," he added.
"Above all, Nico even lacks the funds for conducting a joint study with BAPEX. It was disqualified by the government in the Second Round Bidding. There are many reputed oil companies including Malaysian national oil company Petronas which had propose to develop such abandoned or ring fenced fields. In such a situation shy should Nico be given any priority?," the official asked.
Meanwhile, the Energy Ministry has stopped funding BAPEX for its exploration activities in Salda - 2 gas field for the last three months.
BAPEX struck a small gas field in Salda river area under Kosba thana near the Indian border in early 1996. It started supplying around 15 million cubic feet gas per day (mmcfd) in March 1998 from one well there. The government gave it funds last year to drill the second well, and BAPEX succeeded in striking gas also in the second well in November last, source said.
Source: The Daily Star.
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