An Introduction to the Gas Sector

&
Production Sharing Contract

Bangladesh Oil, Gas & Mineral Corporation

(Petrobangla)
April 30,2008

Emergence of Petrobangla
Bangladesh Mineral Oil & Gas Corporation (BMOGC) was created through PO
#27 on March 26, 1972.
Minerals operation segregated & vested to BMEDC, through PO #120 on Sept.
27, 1972.
Reconstituted Bangladesh Oil & Gas Corporation (BOGC) was short named
Petrobangla through the Ordinance #15, on August 22, 1974.
Importation, Refining & Marketing of crude & petroleum products vested with
BPC through Ordinance #88, on November 13, 1976.
BOGC & BMEDC merged to form Bangladesh Oil, Gas & Mineral Corporation
(BOGMC), by the Ordinance #21 of April 11, 1985.
Partial modification of the Ordinance by the Law 11 of February 1989, the
corp. was short named Petrobangla & given the authority to hold the shares
of the companies dealing in oil, gas & minerals exploration and development.
2

Petrobanglas Vision
To Provide Energy for the Sustainable Economic
Growth and Maintain Energy Security of the
Country.
To Provide Energy to All Socio - Economic Groups
in All the Areas of the Country.
To Diversify Usage of Indigenous Energy.
To Contribute Towards Protection of Environment
of the Country

Petrobanglas Mission
To Expedite Exploration and Exploitation of Oil, Gas,
Coal, and Mineral Resources
To ensure conservation of energy through judicious use
To Carry Research and Development in the Field of
Exploration and Exploitation of Energy and Mineral
Resources
To Promote CNG and LPG for Protection of Environment
To Encourage Foreign and Private Investment in Oil, Gas
and Mineral Sector
Institutional Capacity Building for Achieving the Goals
and Objectives

Energy & Mineral Resources Division

PETROBANGLA

Exploration &
Production

Bangladesh
Petroleum Expl. &
Prod. Co. Ltd.

Production

Transmission

Distribution

Bangladesh Gas
Fields Co. Ltd.

Gas Trans.
Co. Ltd.

Titas Gas T & D

Co. Ltd.

Sylhet Gas
Fields Ltd.

Bakhrabad
Gas Sys. Ltd.

CNG & LPG

Rupantarita
Prakritic Gas
Co. Ltd.

Mining

Barapukuria
Coal Mining Co.
Ltd.

Maddhyapara
Granite Mining
Co. Ltd

Jalalabad Gas T
& D System Ltd.
Pashchimanchal
Gas Co. Ltd.

GAS MANAGEMENT
BGFCL

SGFL

BAPEX

NIKO

CHEVRON

TULLOW

CAIRN

GTCL
JGTDSL

CONSUMER

TGTDCL

CONSUMER

PGCL

BGSL

CONSUMER

6
CONSUMER

Production

Niko
0%

Chevron
35%

CNG
3%

TGTDCL
22%

BGFCL
42%

SGFL
11%

BAPEX
3%

Tea

Tullow
4%

BGSL
5%

Transmission

Cairn
5%

JGTDSL
3%

Domestic

Power
43%

Gas
Supply
Chain

Industry
14%

JGTDS L
4%

P GCL
3%

Distribution

Tea
CNG
Domestic Total
11%
Comm N egl
1.531 35.846 154.313 1401.9
1%
0%
3%
11%
100%

GTCL
70%

BGS L
18%

Captive
12%

TGTDCL
Fertiliser
16%

Avg. Consumption

75%

Fieldwise Production Capacity

Producing Wells

Capacity (MMSCFD)

14

405

Bakhrabad

34

Habiganj

246

Narsingdi

35

Meghna

Sylhet

Kailastila

97

Rashidpur

53

Beanibazar

18

Saldanadi

11

Fenchuganj

17

Sangu

70

Jalalabad

230

Moulavibazar

100

12

450

Feni

Bangura

70

79

1838

Gas Fields
Titas

Bibiyana

Total:

Total

Petrobangla Companies
923 MMSCFD

IOCs
915 MMSCFD

Gas Production and Consumption Data April 23, 2008

Unit: mmscfd
Production
Capacity

Available
Production

Titas

405

397

Bakhrabad

34

33

Habiganj

246

Narsingdi

Fields

Gas Mkt.
Company

Sector

Amount

Power

576

Fertilizer

111

245

Non-bulk

681

35

35

Comp-total

1368

Meghna

Power

77

Sylhet

Fertilizer

65

Kailashtilla

97

96

Non-bulk

135

Rashidpur

53

53

Comp-total

276

Salda

11

12

Power

44

Fenchuganj

17

19

Fertilizer

10

923

906

Non-bulk

35

Sangu

60

61

Comp-total

89

Jallabad

230

147

Power

69

Moulavibazar

100

76

Fertilizer

Bibiyana

450

528

Non-bulk

10

Feni

Comp-total

79

Bangura

70

69

Power

766

S-Total (IOCs)

915

886

Fertilizer

186

Total

1838

1792

Non-bulk

860

Total

1812

S-Total (PB)

TGTDCL

BGSL

JGTDSL

PGCL

Overall

Gas Reserve Vs Production

(As of December 2007)

(GIIP)

21.265

Proven
15.4035

Proven Recoverable
Production

7.42
7.98

Proven Remaining
Probable
Recoverable

5.4711

Possible
Recoverable

7.6918
0

10

15

20

25

Gas in TCF
10

Sector wise Daily Demand Forecast

(GSMP-2006 : Base case)

(MMSCF)

FY

Power

Fertilizer

Non-Bulk

Total

2007-08

658

272

689

1619

2008-09

688

272

764

1725

2009-10

774

278

844

1896

2010-11

812

278

932

2022

2011-12

872

278

1008

2158

2012-13

986

278

1076

2340

2013-14

1097

278

1144

2518

2014-15

1177

278

1215

2669

2015-16

1288

278

1287

2853

2016-17

1388

278

1364

3030

2017-18

1519

278

1442

3240

2018-19

1704

278

1527

3509

2019-20

1921

278

1618

3818
11

Company wise Daily Demand Forecast

(GSMP-2006 : Base case)

(MMSCF)

FY

TGTDCL

BGSL

JGTDSL

PGCL

S&SW

Total

2007-08

1152

294

88

84

1619

2008-09

1168

312

88

83

74

1725

2009-10

1289

346

97

84

80

1896

2010-11

1274

416

106

97

128

2022

2011-12

1365

451

115

109

120

2158

2012-13

1513

464

116

115

132

2340

2013-14

1617

538

117

116

130

2518

2014-15

1723

544

180

108

115

2669

2015-16

1895

560

152

116

129

2853

2016-17

1979

624

149

104

174

3030

2017-18

2106

698

151

107

178

3240

2018-19

2229

772

155

110

243

3509

2019-20

2409

802

168

185

254

381812

Sector wise Daily Demand Forecast

(By Petrobangla-2007)

(MMSCF)

FY

Power

Fertilizer

Others

Total

2007-08

810

289

801

1900

2008-09

886

289

843

2018

2009-10

1191

289

890

2370

2010-11

1284

325

1011

2620

2011-12

1434

325

1088

2847

2012-13

1475

375

1171

3021

2013-14

1588

375

1261

3224

2014-15

1700

375

1360

3435

2015-16

1822

375

1403

3600

2016-17

1960

375

1488

3823

2017-18

2093

375

1577

4045

2018-19

2255

375

1673

4303

2019-20

2417

375

1775

4567

13

Company wise Daily Demand Forecast

(By Petrobangla-2007)

(MMSCF)

FY

TGTDCL

BGSL

JGTDSL

PGCL+ S&SW

Total

2007-08

1340

362

122

76

1900

2008-09

1384

413

127

94

2018

2009-10

1560

463

137

210

2370

2010-11

1664

475

232

249

2620

2011-12

1760

491

233

363

2847

2012-13

1808

563

234

416

3021

2013-14

1932

636

235

421

3224

2014-15

2062

656

237

480

3435

2015-16

2139

660

263

538

3600

2016-17

2290

702

290

541

3823

2017-18

2440

744

316

545

4045

2018-19

2621

788

344

550

4303

2019-20

2778

808

426

555

456714

Projected Daily Gas Production by Petrobangla

(MMSCF)

2007
-08

2008
-09

2009
-10

2010
-11

2011
-12

2012
-13

2013
-14

2014
-15

2015
-16

2016
-17

201718

2018
-19

2019
-20

BGFCL

740

781

876

931

1055

1085

1155

1175

1175

1170

1170

1077

1005

SGFL

202

199

223

300

300

370

475

530

550

610

660

660

660

BAPEX

49

62

141

196

240

270

258

238

240

205

184

138

133

Total

991

1042

1240

1427

1595

1725

1888

1943

1965

1985

2014

1875

1798

COMPANY

15

Projected Daily Gas ProductionIOCs

Company

200708

200809

200910

201011

201112

201213

201314

201415

201516

201617

201718

(MMSCF)
201819

201920

IOC-1 (Existing Fields)

Chevron

905

905

1075

1125

1080

1050

1010

990

950

930

890

870

870

Cairn

70

65

60

55

150

145

140

135

130

125

120

120

100

Tullow

80

100

100

100

100

100

100

100

100

100

100

100

100

45

30

30

25

20

15

15

1061

1076

1280

1310

1360

1320

1270

1240

1195

1155

1110

1090

1070

Niko
Sub-Total

IOC-2 (Expected from Contracted Blocks)

Chevron

100

200

200

200

200

200

200

200

200

Cairn

100

100

100

100

100

100

100

100

Total EP

50

100

100

100

100

100

100

100

Sub-Total

100

350

400

400

400

400

400

400

400

IOC-3 (Expected from 3rd Round Bidding)

0

Sub-Total

300

500

500

500

500

1310

1460

1670

1670

1640

1895

2055

2010

1990

1970

IOC -1 + IOC 2 + IOC - 3

Gr. Total

1061

1076

1280

16

Projected Demand - Supply Balance

(MMSCFD)

2007
-08

2008
-09

200910

2010
-11

2011
-12

2012
-13

2013
-14

2014
-15

2015
-16

2016
-17

201718

201819

Demand

2006

2261

2383

2749

3142

3458

3587

3796

4018

4126

4250

4330

Production
(PB + IOC-1)

2052

2118

2737

2955

3045

3158

3183

3160

3140

3124

2965

2868

Balance

46

-143

-12

-187

-413

-429

-613

-858

-986

-1126

-1365

-1634

Events

2520

137

201920

4502

Reserve basis: P1 + P2 of Existing fields + Sundalpur + Bibiyana Expansion + Magnama.

17

Current Reserve Categories Supply Demand Balance

Shortfall would
would commence
commence in
in 2011 against Proved Reserves
6000

Gas mmcfd

5000
4000
3000
2000
1000

Proved

Probable

Possible

25
20

23
20

21
20

20

19

17
20

15
20

13
20

11
20

09
20

07
20

20

05

Case B Demand
18

Ref: GSMP 2006

Gas Infrastructure
Gas Pipeline Network

Existing
Total Capacity : 2,000 MMCFD
Total Length : 1,900 Kilometer

Compressor
Stations

Rajshahi

Capacity : 1,000 MMCFD

Nalka
Elenga

Future Expansion:
Muchai

Ashuganj
(West)

Ashuganj
(South)

Khulna
West Zone
Proposed Gas
Pipeline
540km

Length : 850 Kilometer

Size: 12 inch to 30 inch pipeline is
planned to construct by 2011 to
cover Rajshahi and Khulna regions.
In addition 4 compressor stations will
be installed at Muchai, Ashuganj
(south), Ashuganj (west) and Elenga
by 2011 to boost up pipeline
pressure.
19

Major Transmission Pipelines

Pipelines

Length
(Km)

Nominal
Diameter
(Inches)

Maximum
Allowable
Operating
Pressure

Capacity
(mmcf)

Commissioned
In the year

North-South

175

24

1135

350

1993

Ashuganj-Bakhrabad

58

30

1000

500

1998

Rashidpur-Ashuganj

[75+82]=157

30,14

1135

500

2002/2004

BeanibazarKailashtila

18

20

1135

200

2001

Ashuganj-Elenga

124

24

1000

270

1992

Elenga-Baghabari

[14+9+16+35]=
74

[24,30,24,20]

1000

200

1999

Bakhrabad-Demra

68

20

1000

250

1985

BakhrabadChittagong

175

24

960

350

1982

Nalka-Bogra

[6+54]
=60

[30,20]

1000

200

2005

Ashuganj-Monohordi

37

30

1000

425

2006

Dhanua-Aminbazar

60

20

1000

2006/2007

20

Transmission Projects under Implementation

Projects

Completion Time

Funded By

Size

Muchai Compressor Station

Dec 2011

ADB

12000 hp

Ashuganj Compressor Station

Dec 2011

ADB

18000 hp

June 2009

ADB

30x51km

Elenga Compressor

June 2011

ADB

10000 hp

Hatikamrul-Ishwardi-Bheramara Pipeline

June 2010

ADB

30x87km

Bonpara-Rajshahi Pipeline

June 2009

ADB

12x51km

Bheramara-Khulna Pipeline

June 2011

ADB

20x165km

Pipeline from Titas field to A-B pipeline

June 2010

ADB/GOB

24x14km

Bakhrabad Siddirganj

June 2010

WB

30x60km

Ashuganj-BKB-CTG Trans. Pipeline

(under active consideration of ADB)

Dec 2011

ADB

30x235km

North-South System Expansion

BB Corridor Expansion
Monohordi-JMB East Loopline
Expansion to West Zone

21

Production Augmentation Activities

(2007-08 to 2008-09)

Company

Well

Period

Production
(MMSCFD)

Dev. Well

Workover

BAPEX

Fenchuganj
#2

May-June
08

15

BGFCL

BKB # 2, 5

Oct.-Dec. 08

20

Tullow

Bangura

June-Dec.
08

30

65

Total

3
22

Production Augmentation Activities

(2009-10 to 2010-11)

Company

Well

Period

Production
Appraisal
MMSCFD Well/Workover

Dev. Well

BAPEX

Shahbajpur

May-Aug 09

20

BGFCL

BKB#9

July-Sept. 09

10

BGFCL

Meghna#1

Aug-Nov 09

15

BAPEX

Semutung

Feb.-July 10

20

BAPEX

Begumganj

Sept.-Oct. 10

30

BGFCL

Titas # 17

Jan-Mar 10

25

BGFCL

Titas # 18

May-Aug 10

25

SGFL

Kaillastila # 7

Jun-Oct 10

25

BGFCL

Habiganj # 12

Sep-Dec 10

25

BAPEX

Sundalpur

Jan-June 10

30

BAPEX

Srikail

Feb.-Jun 11

30

Total

255

23

Production Augmentation Activities

(Long term)
Company
CairnChevron

Programs
Exploration in Block # 5,7,10

Period

Production
MMSCFD

Nov 08
June 12

200

Total EP & Exploration in Block # 17 & 18

JV
(3-D Seismic followed by exploration
drilling)

Nov 08
June 12

50 - 100

Cairn

Nov 08
June 12

100

2009-2016

300 - 500

Exploration Drilling of Magnama & Hatiya

Structure

Bangladesh Offshore Bidding Round 2008

24

PSC ACTIVITIES-SOME DEFINITIONS

Concession
A license, lease, or other permit for
exploration and/or production in an area or
block. It usually denotes a government
lease.

25

PSC ACTIVITIES-SOME DEFINITIONS

Joint Operating Agreement(JOA)
The document governing operations in a Joint Venture of prime
importance to all participants as under it they secure or may lose, rights
to production etc.A typical Joint Operating Agreement will include
sections to cover most or all of the following topics:
-Scope, Duration, Legal Status
-Interest rights and duties of the Operator and other participants
-Management Structure and voting procedure
-Approval of Operating Programmes and Budgets
-Cash contributions, costs and accounting
-Control and custody of joint properties and equipment
-Sole Risk,Default,Withdrawal,Assignment etc
-Disposal of Petroleum
-Confidentiality,
-Force Majeure,Litigation etc.
26

PSC ACTIVITIES-SOME DEFINITIONS

Joint Venture:
A common form of risk-sharing in Oil and Gas
operations, especially exploration and
production. Although they may have many of
the characteristics of partnerships and are
often referred to as such, they are usually
legally constituted specifically to avoid
partnership implications.
27

PSC ACTIVITIES-SOME DEFINITIONS

Production Sharing Contract:
A contract between a host government and
petroleum company for the exploration and
production of petroleum resources where the
company's costs are recovered from a
percentage share of production and the
balance is shared between the government
and the company.
28

On Contracts
These slides are taken from the Training
materials of IHRDC,Boston,MA,USA

29

30

31

32

33

34

35

36

37

38

39

40

41

42

43

44

45

46

Exploration of Hydrocarbon in Bangladesh

Bangladesh is one of the Largest Deltas.Surface Area is
Mostly Covered by Alluvial and Delta Plains, but has
some Hill Areas in the Northeast and Southeastern Part.
Hydrocarbon Exploration Activities Started in
Bangladesh Territory Since 1908.
First Discovery of Gas in Sylhet in 1955
Enactment of Bangladesh Petroleum Act 1974
Promoted New Investment Under Production Sharing
Contract
First Oil Discovery in 1986 at Sylhet-7 Well
47

Exploration of Hydrocarbon in Bangladesh

Phase-I (1910- 1933)
In the early days of exploration, drilling was
targeted near oil/gas seeps in the fold belt. In
this phase six exploration wells were drilled by
Exploration and Production companies without
any discovery. Individual well depth varied
from 763 meters to 1,047 meters. The Second
World War disrupted the exploration activities
until the middle of the last century.
48

Exploration of Hydrocarbon in Bangladesh

Phase-II (1951- 1971)
During the second phase, early forms of modern geophysical
methods were used in exploration. During the 50s and 60s
the onshore area was explored by major International Oil
Companies, e.g. Shell, Stanvac, Pakistan Petroleum Limited
(PPL, a subsidiary of Burma Oil Company) and the national
Oil & Gas Development Corporation (OGDC). Gravity and
Surface Magnetic reconnaissance surveys were conducted
followed by single fold seismic studies supplemented by
geological information from wells and outcrops in the
surrounding areas. The operators of the second phase drilled
22 exploratory wells, thereof one offshore, and discovered
eight gas fields, all in onshore area
49

Exploration of Hydrocarbon in Bangladesh

Phase-III (1972- 2007)

After the emergence of Bangladesh, the Bangladesh Petroleum Act. 1974
was promulgated following which Petrobangla was formed in 1974 to
promote and regulate exploration, production and distribution of
petroleum. The years 1974-78 were focused on offshore drilling by six
International Oil Companies under Production Sharing Contracts (PSC).

The 80,s exploration was targeted on liquid hydrocarbon; Bangladesh

entered into the oil-era in December 1986, when oil was discovered in
Sylhet -7 well. Oil was also tested at Fenchuganj-2 and Kailashtila-2.
Model PSCs of 70's and 80's were based only on oil prospects.

During the period 1972-2008, 173 wells including 26 offshore wells were
drilled by the national organization Petrobangla and foreign oil companies.
Petrobangla discovered 10 gas fields including oil discovery in two gas
fields below the producing gas sands and the foreign companies
discovered five gas fields of which two are in the offshore area.

50

Production Sharing Contract Activities

During 1989 Bangladesh was
divided into 23 acreage Blocks (6
offshore + 17 onshore blocks)
8 PSCs active in 10 Blocks
IOC
Block (s)
Cairn, UK
16, 5 & 10
Chevron, USA 12,13 & 14, 7
Tullow, Ireland 9
Tullow, Ireland 17 & 18

Nos
3
3
1
1

BAPEX working in 2 Blocks (Blocks 8

and 11)

11 Blocks are open

51

PSC Activities: Cairn Energy

Operation: In Block# 16, 10 & 5
Discovery: Offshore Sangu gas field
Production: 70 MMCFD from Sangu gas
field
Present partnership of Sangu Gas Field:
Santos-37.5%,Cairn-37.5%, Halliburton
& Roots-25%.
Submitted appraisal program for further
activities like 3D Seismic & drilling wells
at Maghnama and Hatia structures
Development partner: Bapex (10%
carried) in Block#10 & 5
Conducted seismic surveys in Block#10
and Block#5
52

PSC Activities: Chevron

Operation: In Block#12, 13, 14 and 7
Discovery: Maulavibazar gas field in Block#14 and
Bibiyana gas field in Block#12
Production: 230 MMCFD from Jalalabad gas field and
112 MMCFD from Maulavibazar gas field
Bibiyana gas field started production from March 2007 &
presently producing 450 MMCFD ,500 MMCFD by Dec
2008 .
Block#7: Offered under 2nd Round of Bidding, partner
BAPEX (10% carried), conducted seismic survey,
identified leads & planning to conduct more survey to
confirm the leads.
53

PSC Activities: Tullow-Niko-Bapex

Contract signed : April 11, 2001 under 2nd Bidding
Round in Block# 9
Partnership : Tullow - 30%, Niko - 60%, & Bapex - 10%
(Carried)
Activity: Conducted 2D & 3D seismic surveys and
drilled 3 exploration wells
Discovery: Bangura and Lalmai gas fields
Producing 70 MMCFD from 3 wells under Long-term
Testing.
Expected to increase production upto 100MMCFD by
July 2008.
54

PSC ACTIVITIES: TOTAL E & P

Operation : In Block # 17 & 18
Discovery: Nil
Offered under 1st Round of Bidding
Conducted seismic survey during Initial Exploration Period and
drilled 1 well (Reju # 1) during 1st extension of the Initial
Exploration Period
An Amendment Agreement has been signed on March, 2007 to
extend the Exploration Period upto March 2010.The exploitation
program includes:1000 sq. km 3D seismic and drilling of one well.

55

Review of the acreage block map - 1989

No. of blocks : 23
No. of onshore blocks: 17
No. of offshore blocks : 6
Average size: 11,000 sq. km
Southern boundary of blocks were upto 20
degree North Latitude
During 1st and 2nd bidding rounds total 10
PSCs were signed for 12 blocks
Currently 8 PSCs are active in 10 blocks
Due to large size of the blocks, none of these
blocks were fully explored
56

57

The Acreage Block Map - 2008

Number of blocks on offer - 28 offshore blocks
The shallow water blocks situated north of
20 N latitude are categorized as Type-A
The deep water blocks situated south of 20
N latitude are categorized as Type-B.
Type A: Average size 6,000 sq. km
No. of blocks - 8
Max. Water Depth about 200 m
Type B : Average size 3,300 sq. km
No. of blocks - 20
Max. Water Depth about 2000m

58

SALIENT FEATURES OF THE MODEL PSC 2008

Parties

The Government of the People's Republic of Bangladesh

and Bangladesh Oil, Gas & Mineral Corporation (Petrobangla)

Contractor(s)

Contract Period

Exploration: 8 (4+2+2) years for Type - A Blocks

9 (5+2+2) years for Type - B Blocks

Appraisal: : Up to a maximum of three years if needed

Production: For each production area 20 years from the approval

date of Development Plan for an Oil Field and 25
years for a Gas Field. Provision for five years
extension subject to Petrobanglas approval.
59

RELINQUISHMENT

25% of the contract area at the end of 4th/5th contract year;

however in case of seismic only option at the end of 3rd
contract year.

Additional 25% at the end of the 6th/7th contract year

All areas not declared as production areas at the end of the

8th/9th contract year

MINIMUM WORK OBLIGATION

Mandatory Work Program: During Initial Exploration Period, the
Contractor shall conduct:
2D seismic survey in a given grid covering the entire Contract Area for
both Type-A and Type-B blocks .
Drilling of 1 exploration well only for Type A blocks.
60

BIDDABLE MINIMUM WORK PROGRAM

Initial Exploration Period :
Geological Survey, Geophysical Survey, Other Surveys and
Drilling of Exploration Wells
1st Extension to Initial Exploration Period:
Geological Survey, Geophysical Survey and Drilling of
Exploration Wells.
2nd Extension to Initial Exploration Period:
Geological Survey, Geophysical Survey and Drilling of
Exploration Wells.
61

JOINT REVIEW COMMITTEE

A Joint Review Committee (JRC) shall be established by Government/

Petrobangla and Contractor promptly after the Effective Date.

JRC shall consist of eight (8) members, three (3) of whom shall be
designated by Petrobangla, one (1) by Government and four (4) by
Contractor.

The Chairman of the JRC shall be designated by Petrobangla from

among the members appointed by it.

The JRC shall review and make recommendations,opinion or decision

on the proposed Work Program and Budget submitted by Contractor for
each Contract Year during Exploration Period.

62

BANK GUARANTEE

Bank guarantee against minimum biddable work program must

reflect market cost.

Within thirty (30) days of the signature of the Contract, and upon
each request for extension of the Exploration Period, Contractor
shall provide Petrobangla an irrevocable and unconditional bank
guarantee in form and substance.

If the Contractor fails to perform any of its accrued Minimum

Exploration Program, then the Contractor or its guarantor shall
pay Petrobangla the entire amount of such outstanding guarantee
or guarantees for the work.

The companies constituting the Contractor shall procure and

deliver to Petrobangla within thirty (30) days from the Effective
Date of the Contract financial and performance grantee in favor of
Petrobangla from a parent company acceptable to Petrobangla.

63

CONTRACTOR'S OBLIGATIONS

Register within one hundred and eighty (180) days of the Effective
Date a subsidiary or branch or representative office in accordance
with the relevant provisions of Applicable Law

Conduct all Petroleum Operations in a diligent, conscientious and

workmanlike manner

Contractor shall maximize the employment of Bangladeshi nationals

possessing the requisite qualifications and experience in Petroleum
Operations. Contractor shall ensure that the employment of the
Bangladeshi nationals be maintained in the following proportion:
Exploration Period: Initial Exploration Period not below 20%.
Extended Exploration Period not below 50%
Production Period: 1st five years - not below 60%
Next five years - not below 75%
Period after ten years - not below 90%

64

The Contractor shall obtain the following insurance

coverage for Petroleum Operations :
Loss or damage to all installations, equipment and other assets
Loss of property or damage or bodily injury suffered by any
third party
The cost of cleaning up pollution following an accident
The Contractors liability to its employees
Cost of well control and re-drilling expenses
Third party liabilities

Contractor shall furnish to Petrobangla policies / certificates

evidencing that such coverage is in effect.

Such insurance policies shall include Petrobangla as additional name

insured and shall waive subrogation rights against Government and
Petrobangla.
65

Contractor shall conduct the following environmental

examinations:
Initial Environmental Examination (IEE)
Environmental Impact Assessment (EIA)

Environmental Management Plan (EMP) as per prevailing Environment

Conservation Act, 1995 and Environmental Conservation Rules 1997

In case of any damage or expense caused by inefficient,

careless or negligent activities of the Contractor:
Contractor will not be allowed to recover the cost for such damage
under Cost Recovery
Contractor shall pay due compensation for such damage.
66

JOINT MANAGEMENT COMMITTEE

Within thirty (30) days after the Date of Declaration of the first
Commercial Discovery, a Joint Management Committee (JMC)
shall be established by Government/Petrobangla and Contractor .

JMC shall consist of eight (8) members, three (3) of whom shall be
designated by Petrobangla, one (1) by Government and four (4) by
Contractor.

The Chairman of the JMC shall be designated by Petrobangla from

among the members appointed by it.

67

The JMC shall amongst other things deal with the

following matters :
All Work Programs, Budgets and other reports and
proposals submitted by Contractor to Petrobangla
Progress of Contractor's work
Any problem arising in Petroleum Operations
Appointment of auditors
Loan agreements for Development Plan
Annual personnel plan of the Operator
68

WORK PROGRAM AND BUDGET FOR

DEVELOPMENT PLAN

Within sixty (60) days after Petrobangla's approval of a

Development Plan, Contractor shall propose a detailed Work
Program and Budget for that Production Area for the ensuing
Calendar Year. The Joint Management Committee shall act on
such proposals.

No Petroleum Operations shall be carried out unless and until the

relevant Work Program and Budget has been approved in writing
by Petrobangla.

If there is difference in opinion regarding a Budget proposed by

Contractor and the Parties fail to resolve it, then, notwithstanding
the foregoing, the matter shall be referred to the Secretary of the
Energy and Mineral Resources Division
69

COST RECOVERY AND PROFIT ALLOCATION

COST RECOVERY

Contractor shall recover all costs and expenses in

respect of Exploration, Appraisal and Development
related operations

The Cost Recovery limit shall be maximum of fifty-five

percent (55%) per Calendar Year of all Available Oil /
Natural Gas/ Condensate/ NGL from the Contract Area.

70

PROFIT SHARING
The Profit Petroleum shall be allocated between Petrobangla
and Contractor in the following proportions:
Type A Block
Oil/Condensate/NGL: Biddable from 55% to 80% on tranches from 12,500
to 100,000 bbl/day or above
Gas: Biddable from 55% to 80% on tranches from 75 to 600 mmscf/day
or above

Type B Block
Oil/Condensate/NGL: Biddable from 50% to 75% on tranches from 12,500
to 100,000 bbl/day or above
Gas: Biddable from 50% to 75% on tranches from 75 to 600 mmscf/day
or above

71

NATURAL GAS
Contractor shall have the right to produce annually a total volume of Gas up to 7.5%
of the Proven Recoverable Gas reserves from onshore blocks
In case of offshore blocks a greater percentage may be agreed by Petrobangla and the
Contractor
Natural Gas for Export
Contractor shall have the right to export any Marketable Natural Gas produced from
the Contract Area in the form of Liquefied Natural Gas ("LNG"), subject to first right of
refusal of Petrobangla
Gas Price
Onshore gas: 75% of HSFO with biddable discounts. The price will have a
floor of US$70/metric ton and a ceiling of US$180/metric ton of HSFO
Offshore gas (Type A blocks): 25% higher than the onshore gas price
Offshore gas (Type B blocks): 100% of the HSFO
Western zone (Onshore): 25% higher than for the other onshore gas price
72

PIPELINES

Contractor shall have the right to operate the Pipeline until cost
recovery is completed. If Petrobangla so desires the Contractor
shall continue to operate the Pipeline after the Cost Recovery .

Except Petrobangla, all parties who use the Pipeline

downstream of Measurement Point shall pay 1% tariff against
their share of Petroleum transmitted through the pipeline for
transmission service. Any tariff received will be paid to the
account of Petrobangla

However, the Contractor will be exempted from paying tariff

during cost recovery of the said pipeline

Title to the Pipeline(s) shall be with Petrobangla

73

VALUATION OF PETROLEUM

For third party sales, the value of petroleum will be realized at

arms length

If there have been no sales of Crude Oil to third parties at arm's

length, the Value of Oil shall be determined as follows:
on the basis of the FOB selling price per Barrel of a basket
of three Crude Oils
On the basis of the spot market for the same Crude Oils

Spot price and FOB selling price will be taken from Platt's Oilgram
or Asian Petroleum Price Index (APPI)

74

TAXES AND DUTIES

No taxes will be imposed on materials and equipment related to Petroleum
Operations brought into Bangladesh by Contractor, its subcontractors or by any
agent on permanent or re-exportable basis
Contractor shall be liable to pay including but not limited to the
following:
Corporate income tax
Income tax of employees of Contractor
Income tax of sub-contractors
Duties and taxes on locally purchased goods and commercial services
Any levies or exaction in respect of property including leased property,
capital, net worth, operations, remittances or transactions
75

TAXES AND DUTIES

Duties and VAT on imported office equipment, air conditioners,

refrigerators, sedan cars and station wagons, microbuses, household
utensils .
Value Added Tax and Supplementary Duty (if any) for goods and
services purchased to implement Petroleum Operations as per
provisions of the Value Added Tax Act. 1991 and the Value Added
Tax Rules, 1991 or as may be amended from time to time.

76

FEES AND BONUSES

The Contractor shall pay the following fees and bonuses:
Discovery bonus : UD$ 3,000,000
Production bonus : US$ 500,000 to US$ 4,000,000 for
different production levels
Research and development fees : US cents 3 per Barrel
of Contractor's Profit Oil and Profit Condensate and US
cents 0.4 per MCF of their profit Natural Gas
Contract service fee : US$200,000/year for Exploration
and Development Period
US$ 300,000/year for Production
Period

77

TITLE TO ASSETS AND DATA

Petrobangla shall become the owner of the following:

Any immovable property purchased or acquired by Contractor

Any fixed or movable asset purchased by Contractor outside

Bangladesh when it is landed in Bangladesh

Any fixed or movable asset purchased in Bangladesh as soon

is purchased

All original geological, geophysical, geochemical, drilling,

engineering, well logs, production and other data obtained or
compiled by Contractor as a result of Petroleum Operations

as it

78

SUPPLY OF INTERNAL DEMAND AND STATE'S

RIGHT OF REQUISITION

Contractor shall be required to provide 80% of its

pro-rata share Oil, Condensate and NGL at 15%
discount to meet internal demand.

Contractor shall not enter into any contract for sale of

any part of Petrobangla's Oil from the Contract Area
without Petrobangla's prior specific consent.

79

EMPLOYMENT, TRAINING
AND TECHNOLOGY TRANSFER
Together with the yearly Work Program and Budget, Contractor shall submit
its manpower requirements including its organization chart.
Contractor shall first obtain written approval from Petrobangla for any
positions to be filled by expatriate personnel by ensuring that expatriate
personnel are employed only to occupy positions for which it has not been
possible to obtain Bangladesh personnel. [This clause will not be applicable
for the Exploration Period of offshore blocks]

Contractor shall review its expatriate requirements with

Petrobangla annually.

Contractor shall consult with Petrobangla for the purpose of

employing qualified Bangladesh personnel in the conduct of
Petroleum Operations.
80

During Petroleum Operations, Contractor shall have the obligation to

arrange for the systematic transfer of its technology, know-how and
experience to Petrobangla

Contractor shall offer a mutually agreed number of Bangladeshi

nationals the opportunity for on-the-job training and practical
experience in Petroleum Operations

During the Exploration and Development Period, Contractor shall

make a training grant to Petrobangla of US$150,000 per Contract
Year

Following the Date of Commencement of Commercial Production,

Contractor shall make a training grant to Petrobangla of US$ 200,000
per Contract Year

The above training grants shall not be subject to Cost Recovery.

81

CONSULTATION, EXPERT DETERMINATION AND

ARBITRATION

The Parties shall make their best efforts to settle any dispute
amicably through consultation

If any dispute is not settled through consultation, the Parties may, by

mutual agreement, refer the dispute for determination by a sole
expert to be appointed by agreement between the Parties.

The proceedings before the sole arbitrator or the arbitration tribunal

shall be governed by the Bangladesh Arbitration Act 2001.

In pursuance of section 25 of the Arbitration Act 2001, the sole

arbitrator or the arbitration tribunal shall conduct the arbitration in
accordance with the United Nations Commission on International
Trade Law Arbitration Rules (UNCITRAL Rules).

82

ASSIGNMENT

Contractor may with prior written approval of Petrobangla assign

any or all of its rights, interests and obligations to any of its
Affiliates or to a non-Affiliated third Party

The proposed assignee or assignees must produce reasonable

evidence of its or their financial and technical competence

In case of any change in the status of any entity comprising the

Contractor or its share holding resulting in a change in the control of
the entity; or its relationship with the company(ies) providing the
guarantee; the company shall seek the consent of the Government
/Petrobangla for assigning the Participating Interest under the changed
circumstances

(control means ownership by one company of more than fifty percent

(50%) of the voting securities of the other company; or the power to
direct, administer and dictate policies of the other company )

83

ASSIGNMENT

The assignor shall submit a valuation and all material terms of the assignment.

Any transfer or related taxes, stamp, duty, charges or other fees from any
assignment shall be borne by Contractor.

The Government/Petrobangla reserves the right to employ an independent

consultant, at the cost of Contractor to be mutually agreed by government/
Petrobangla and such entity, to carry out an independent valuation of the
assignment transaction.

84

UNITIZATION

Provision for Unitization between two adjacent blocks

where a single geological structure spreads over both the
blocks

Provision for international unitization agreement if a

single geological structure spreads over international
boundaries

85

ABANDONMENT

During the term of the Contract, Contractor shall be responsible for

Abandonment of all Petroleum facilities.

Contractor shall conduct Abandonment Operations in accordance

with the approved Abandonment Work Program and Budget

Contractor shall commence payment to Petrobangla into a fund

called "Abandonment Fund" on the first anniversary of the First
Commercial Production

Contractor shall not have to be liable for both payment into the
Abandonment Fund and the actual cost for Abandonment of
Petroleum facilities carried out by Contractor during the term of this
Contract.

Abandonment Fund payments made by Contractor to Petrobangla

shall be cost recoverable.
86

BID AREA
Number of blocks on offer: 28 offshore blocks
The shallow water blocks situated north of 20 N
latitude are categorized as Type-A
The deep water blocks situated south of 20 N
latitude are categorized as Type-B.
Size
Average size of Type-A blocks ~6,000 sq.km.
Average size of Type-B blocks ~3,300 sq.km.
Water Depth
Water depth of Type-A blocks: upto 200 meter.
Water depth of Type-B blocks: above 200 meter.
87

BASIS OF BID EVALUATION

Pre-qualification Criteria
Bidder, whether individual or in case of joint venture at least one member must
hold an offshore acreage as operator, with an offshore daily production of at
least 25,000 BOE to be considered as technically qualified for bidding.

Evaluation Criteria

Biddable Work Program:

Seismic Survey
Wells
Other Surveys (Geochemical, Seabed Sampling, Gravity, Magnetic, Sea bed mapping
etc.)
Bank Guarantee

Fiscal Package:

Percentage of Profit Petroleum Allocation: Biddable from the minimum level for
each tranche as per PSC Article 14.6. The bidder offering higher profit petroleum share
indicating better NPV to the government will be more favorably evaluated.

[30 marks]

[70 marks]

88

EVALUATION OF BIDS AND REJECTION CRITERIA

To be qualified for selection, the bidder, whether individual or in case of

joint
venture, at least one member must hold an offshore acreage as operator, with an
offshore daily production of at least 25,000 BOE to be considered as technically
qualified for bidding.

A bid not confirming commitment to the Mandatory Work Program shall be

liable to be rejected.

The bidders shall be required to commit at least one exploratory

well in the Initial Exploration Period for the Type - A blocks.
Otherwise, such bid shall be liable to be rejected.

A bid would be liable for rejection if it contains any conditions,

assumptions and/ or deviations which are inconsistent or not
complying with the contract terms.
89

EVALUATION OF BIDS AND REJECTION CRITERIA

For a bid to be valid, bidding company or consortiums required to

purchase the Promotional Package before the bid closing date.

Government may also take into account the past performance

of
bidding companies including the track record of the companies or
the consortium in respect of court cases against or any other basis
and on this consideration or any other consideration, at the sole
discretion of the Government, it may accept or reject any or all bids.

Government at its sole discretion reserves the right to accept or

reject any or all of the bids received without assigning any
reason, whatsoever.

90

AVAILABILITY OF DATA
Information Package: Includes the detailed Notice Inviting Bids, a brochure
providing geological and related information, details of the blocks offered, the
Model Production Sharing Contract-2008, The National Energy Policy-1995,
The Bangladesh Petroleum Act-1974, Promotional Package order form with
content and Data Sales Package order form with content and price. The
Information Package will be available at a cost of TK. 7000 or US $ 100.
Promotional Package: Includes 28 maps/sections representing geology of the
country. Purchase is mandatory to qualify for bidding. Price is US$ 7,500 or
BDT 525,000.
Data Packages: Contains seismic sections, gravity, magnetic, geological
maps, wire line logs and geochemical data etc. to enable companies to assess
the geological prospects of the blocks on offer. Several Data Sales Packages
are available at different prices.
91

Way Forward
Steps to be taken to meet future energy demand:
Exploration Efforts to be Strengthened to Discover More Gas
by Petrobangla and IOC

Sole Dependency on Natural Gas has to be Reduced.

Usage of Renewable Energy to be Encouraged and Pursued.

Energy Conservation, Energy Mix Policy
New Power Plants should have Dual Fuel Provision.
Countrys Indigenous Coal Extraction to be Given Priority.
Initiative for Import of LNG or Pipe Gas should be undertaken as
soon as possible
92

VALUE OF EDUCATION& HUMAN RESOURCES

VALUE OF EDUCATION
"If you plan for a year, plant a seed. If for ten years,
plant a tree. If for hundred years, teach the people.
When you sow a seed once, you will reap a single
harvest. If you teach the people, you will reap a
hundred harvests".
K'uan-tzu (591-47 BC)

Value of Human Resources

"Human Resource is the means and end of all
development"
93

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