On July 27th, the State Minister for Energy and Mineral Resources, Nasrul Hamid, announced that Bangladesh will have to pay approximately $960 million per month to LNG suppliers, international oil companies, and local and foreign power plant owners for outstanding dues before the upcoming elections.
Energy Crisis in Bangladesh
Every week, around $240 million will be paid, with $160 million going towards repaying loans of various power plant owners under the Ministry of Power, Energy, and Mineral Resources or the BPDB, and $80 million for payment to the PDB. Payments will also be made to LNG suppliers and IOC, he said.
As stated by Hamid, Prime Minister of Bangladesh Sheikh Hasina, who also serves as the Minister in charge of the Ministry of Power, Energy, and Mineral Resources, recently issued instructions which resulted to the current decision.
Earlier, the Chairman of Petrobangla, the state-run oil company, had written a letter to the MPMP, highlighting the need to repay loans to MPMPR – both long-term and current ones – to ensure uninterrupted natural gas supply.
Under a new model production-sharing contract for offshore blocks, Bangladesh’s Cabinet Committee on Economic Affairs had recently approved the plan to initiate bidding for hydrocarbon exploration in the country’s sovereign waters, said a senior Petrobangla official.
The upcoming offshore bidding round 2023, designed to attract IOC investments, was initiated under the previous Model PSC, which came after a gap of four years in 2019, as opposed to the previous production-based formula and instead based on a profit-sharing formula.
This means that companies will be able to reduce their costs, receive a greater share of production, and have the right to export natural gas after fulfilling domestic demand.
Under the new contracts, Petrobangla will purchase LNG from foreign exploration contractors at 10% of an unbounded average Brent crude price for three months, which is currently more than three times the current price of around $2.75/MMBtu. $83/mmbtu.
He said that Bangladesh’s new Model PSC has combined the use of LNG purchases without any price cap, linked to the benchmark used for importing LNG without price ceiling, which used to be purchased at a contracted price based on the remaining production-based formula and the balance uncontracted price.
Bangladesh currently has 26 unexplored and 22 offshore blocks. Out of the unexplored blocks, 15 are located in deep water, and 11 in shallow water.
SSC-04 and SSC-09, two of the nation’s two shallow-water blocks that are being jointly explored by ONGC Videsh and Oil India, are up for PSC. Only four offshore blocks have been allocated to foreign companies; Chevron is exploring and producing natural gas in three offshore blocks, while Singapore’s KrisEnergy is producing natural gas from Block-9.
Bangladesh’s deep-water exploration received a setback when POSCO International of South Korea pulled out of Block DS-12 in 2020 after making better commercial terms’ demand for the expansion of its PSC. Petrobangla rejected it.
Petrobangla had earlier provided three deep-water blocks, DS-16 and DS-21, to a joint venture between ConocoPhillips and Norway’s Statoil in the 2012 bidding round but the companies stepped back before signing the production-sharing contract, citing unattractive commercial terms.