Tuesday, February 18, 2014

OVL gets $135 mn contract for oil exploration in Bangladesh

OVL MD DK Sarraf
GIVING a big boost to Indo-Bangla energy ties, ONGC’s overseas arm ONGC Videsh (OVL) signed a $135 million Production Sharing Contract (PSC) for two shallow water exploration blocks SS-09 & SS-04 in the Bay of Bengal of Bangladesh on Monday with Petrobangla, the state-owned oil company in Bangladesh, says an OVL press release. Bangladesh's state-owned Petrobangla inked the two pacts with ONGC and OIL for two shallow water blocks....
at a ceremony joined by senior government leaders. OVL along with Oil India Limited (OIL) formed a consortium (50:50) and participated in the Bangladesh Offshore Bidding Round 2012, launched by Bangladesh Government. The OVL consortium was officially notified as the winner of two shallow water blocks on August 20, 2013, the release added. The government of Bangladesh approved the award of the blocks to OVL and OIL consortium on December 3, 2013. The pacts were signed at a ceremony joined by senior government leaders, including Finance Minister A M A Muhith and Prime Minister Sheikh Hasina's energy affairs adviser Tawfiq-e-Elahi Chowdhury. "We needed to proceed quickly to explore our energy... I hope they (ONGC and OIL) will carryout an aggressive exploration campaign though we may not expect any production in the next five years," Chowdhury told the ceremony. Under the deal, OVL would also have rights to explore an already discovered offshore gas field near Kutubdia beyond their allocated blocks but the contract obligated them to complete the exploration works in eight years after the seismic surveys are carried out. OVL and OIL are also obligated to spend $58 million for block 4 and carryout 2,700 km-long 2D seismic survey, 200 sq km 3D and drill two wells during the contract period.
For the other block OVL and OIL will have to spend $85 million and conduct at least 2,850 km-long 2D seismic survey, 300 sq km 3D and drill three wells during the contract period, of which five years will be treated as initial period and the three years for subsequent exploration. The contractors will be allowed to operate and sell oil and gas for 20 years from an oil field and 25 years from a gas field. Wellhead gas prices in Bangladesh are pegged to high sulphur fuel oil (HSFO) prices in the international market, while oil prices are determined on the basis of a 'fair market value'. Under the contract the floor price for HSFO has been fixed at $100 per tonne and the ceiling price at $200/tonne. As per the PSC, OVL will have rights of full repatriation of profits without any signature bonus or royalty and need not to pay duty for equipment and machinery imported for operations during the exploration, development and production phases and will have 100 per cent cost recovery and production bonuses. The ONGC and OIL could also sell gas independently to third parties instead of going through Petrobangla and companies will be allowed to market the gas domestically as well, but Petrobangla will have the first right of refusal.
ONGC Videsh Ltd, a Miniratna CPSE under ministry of petroleum & natural gas is the wholly owned subsidiary and overseas arm of Oil and Natural Gas Corporation Limited (ONGC). OVL owns participating Interests in 32 oil and gas assets in 16 countries and contributes to 12 percent and seven percent of oil and natural gas production of India respectively. In terms of reserves and production, OVL is the second largest petroleum Company of India, next only to its parent ONGC. 

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