Staff Correspondent

The government on Wednesday unveiled the model production sharing contract for the third round bidding for offshore blocks with a provision to realise compensation from international oil company for any accident in gas fields.

The model PSC, approved by the council of advisers on Tuesday, has also a provision for holding arbitration with any IOC, selected in the bidding for 28 blocks, in accordance with Bangladesh Arbitration Act 2001, and the arbitration will be held in Bangladesh.

Special assistant to the chief adviser M Tamim, energy secretary Mohammad Mohsin and Petrobangla director (PSC) Muktadir Ali highlighted different aspects of the model PSC at a press conference held at the energy division.

‘Given the situation after accidents at gas fields during different times, the model PSC has included a provision for the first time that if any accident occurs at any gas field because of the negligence and imprudent activities of the contractors, there will be no chance of cost recovery for the damages; moreover the contractors shall pay the compensation for the damages,’ says a statement read out by Mohsin.

As the existing production sharing contracts, used in the first and second round bidding, haven’t clarified compensation issue, companies like Chevron and Niko, are reluctant to pay compensation for Magurchhara and Tengratila gas field blow-outs. Besides, Petrobangla has been forced to go to international arbitration several times over the dispute with IOCs on gas transmission lines and payment of wheeling charge as per the existing PSCs.

‘In the new PSC, we have changed the arbitration venue and the rules. Earlier arbitration tribunal conducted operation as per ICSID [International Centre for Settlement of Investment Disputes of the World Bank group] arbitration rules. But now the proceedings of the arbitration tribunal will be conducted in Bangladesh.

Tribunals will follow UNCITRAL [United Nations Commission on International Trade Law] Arbitration Rules,’ said Muktadir. The model PSC also keeps a provision for joint development of any gas field which has an underground reservoir sprawling over a neighbouring block or country.

Whether the provision for joint development has been made considering the intrusion of India and Myanmar into the Bangladesh water territories, Mohsin said, ‘If we find any gas reservoir sprawling over a neighbouring country, we will negotiate with it for joint development. Yes, if we have any common gas reservoir with Myanmar and India, we may negotiate.’ About the issue Tamim said, ‘We will go with the bidding for all the blocks.

If any dispute arises over any block, we will negotiate.’ He said they decided to make the model PSC public to bring more transparency in selecting the IOC. ‘We don’t want to play hide and seek. Everyone will know everything about the process. We are doing this for the sake of the country’s interest and to ensure energy security.’ He also said there might be lacking in the PSC and there would be criticism.

‘But Petrobangla and energy division officials made their utmost efforts to prepare the model and prepared the best possible model.’ The special assistant said the bidding for the offshore blocks was significant for finding new gas fields as the country that faces a gas shortage of around 100 million cubic feet per day would face severe gas shortage by 2011 with the existing reserve.

Apart from the exploration of gas in the offshore, he said, they would take multi-pronged approaches to find out more energy sources like more gas in onshore areas, import of gas and development of coal fields. Mohsin said Petrobangla would invite the tender for eight shallow and 20 deep sea blocks by the middle this month possibly on February 15 and complete the bidding process and sign the PSCs with IOCs by October.

The model PSC proposed higher gas price than the existing price for offshore gas for international oil companies. The price of gas for 20 deep sea blocks will be 100 per cent of High Sulphur Fuel Oil in Singapore market. But the upper ceiling of the price will be $180 per tonne.

The price for eight shallow sea blocks will be 93 per cent of HSFO price with the same upper ceiling. As per a Petrobangla estimate, the highest price of gas for deep sea blocks will be around $4.7 per 1000 cubic feet or one unit while the highest price for shallow sea blocks will be around $4.4 per unit.

Although the model PSC for third round bidding proposed higher gas tariff, it has a provision that IOCs will have to pay corporate tax. Regarding to cost recovery, the model says the contractors will be able to recover 55 per cent of its investment from the price of gas/oil/condensate or LNG every year and after cost recovery, Petrobangla will get 55-80 per cent of the gas or oil from the shallow sea blocks as profit and 50-70 per cent gas oil from the deep sea blocks.

Comments

Add New

Write comment
Name:
Email:	We don't publish your mail. See privacy policy.
Title:
	Please input the anti-spam code that you can read in the image.