The onslaught of coronavirus is delaying drilling of an exploratory well by India’s ONGC Videsh Ltd, or OVL, at Kanchan under shallow sea block SS-04.The Indian firm has already informed state-run Petrobangla about the novel coronavirus issue and cited it as the cause for delay in initiating the drilling programme.
Earlier, a dispute over advance income tax (AIT) on drilling equipment and demurrage payment delayed the drilling by five months until February this year.The ONGC was supposed to initiate the drilling in the shallow water offshore block in October last year, said a senior Petrobangla official.
Currently, no exploration activities are being carried out in offshore blocks inside the country’s territorial areas in the Bay of Bengal.The ONGC planned to drill the well at Kanchan, buoyed by the findings of two dimensional (2D) seismic surveys.
Drilling a well in Block SS-04 by the Indian firm is mandatory as per the production sharing contract (PSC) between the consortium of ONGC and Oil India Ltd. (OIL) and state-run Petrobangla and the government, the official said.
The ONGC will also have to drill another well in shallow water block SS-09 by February 2021.Petrobangla signed two PSCs with the ONGC, the operator of blocks SS-04 and SS-09, on February 17 in 2014, which were set to expire in February 2019.
Petrobangla, however, extended the tenure of the PSCs by two years till February 2021 to facilitate hydrocarbon exploration by the contractor, said the official. Currently, there is no producing offshore gas well in the country and the entire natural gas output comes from the country’s onshore gas fields as well as import of liquefied natural gas or LNG.
Any fresh discovery of hydrocarbon in an offshore field will boost the country’s future oil and gas reserves.The country’s overall natural gas output is currently around 3,050 million cubic feet per day (mmcfd), of which around 501 mmcfd is re-gasified LNG and the remaining 2,550mmcfd is local gas, according to the Petrobangla data as of June 11, 2019.
The ONGC is the operator of two shallow water blocks — SS-04 and SS-09 — having participating interest of 45 per cent.OIL holds 45 per cent participating interest and the Bangladesh Petroleum Exploration and Production Company Limited or BAPEX holds the remaining 10 per cent interest.
The Block SS-04 covers an area of 7,269 sq km while the Block SS-09 stretches an area of 7,026 sq km. Water depth of both the blocks ranges between 20 and 200 metres.The exploration term for both the blocks consists of eight consecutive contract years– five years as initial exploration period and three years as subsequent exploration period.
As per the PSC, ONGC is committed to conducting 2,700 line-kilometre 2D seismic data acquisition and processing and one exploratory well in Block SS-04 and 2,700 line-kilometre 2D seismic data acquisition and processing and two exploratory wells in Block SS-09.
The ONGC will be allowed to operate and sell oil and gas for 20 years from an oil field and 25 years from a gas field. The ONGC has already completed around 3,100 line-kilometre 2D seismic surveys for both the blocks.
Wellhead gas prices in Bangladesh are pegged to high sulphur fuel oil or HSFO prices in the international market. The floor price for HSFO has been set at $100 per tonne and the ceiling price at $200 per tonne to fix gas price. The latter works out to around $5.50 per Mcf or 1,000 cubic feet.
Other features of the PSC include the licence holder will have the right to full repatriation of profits; will not be charged any signature bonus or royalty; would not need to pay duty for equipment and machinery imported for operations during the exploration, development and production phases; will have 100 per cent cost recovery; and production bonuses.The contractor can also sell gas to third parties after Petrobangla’s first right of refusal.