Mar. 16, 2024
This month, the Bangladesh government invited international bids for oil and gas exploration in 24 blocks in the Bay of Bengal. This is aimed at increasing the country’s oil output. For several years, Bangladesh has been plagued with energy shortages, as its gas reserves have been depleting. Further, the rise in energy prices following the Russian invasion of Ukraine and subsequent sanctions on Russian energy have hit the low-income country hard.
It is the first round of bidding since 2012 to offer offshore acreage, with 15 deep-water and nine shallow-water blocks available. The bidding round was approved following the provision of a 2D multi-client seismic data survey from the energy data firm TGS. The company delivered data from over 75,000 km2 across all 24 blocks on offer in April 2023.
David Hajovsky, the Executive Vice President of Multi-Client at TGS, stated: “The Bengal Fan is one of the world’s largest deep-water fans with significant evidence of working petroleum systems. It is widely considered one of the most extensively underexplored frontier regions. With limited existing offshore Bangladesh data, this new high-quality seismic, combined with the revised Production Sharing Contract 2023 (PSC), is a critical component for companies to evaluate and submit competitive bids for the blocks on offer in the Bid Round.”
The government set a deadline for bids for the first week of September, with evaluations and deals expected to be finalised by the end of the year. Zanendra Nath Sarker, the chairman of state-owned Bangladesh Oil, Gas and Mineral Corporation (Petrobangla), stated “We’re making plans to reduce supply shortages to keep gas-fired power plants and industries running.” He also stated the company’s intention to “drill 100 new gas wells in the country between 2025 and 2028 to boost local production.” There are two shallow water blocks under contract for exploration with a joint venture of ONGC Overseas Limited and Oil India Limited where drilling has already begun, according to officials.
Bangladesh has proven oil reserves of around 82 million barrels and a production rate of approximately 4,105 bpd. However, there are fears that Bangladesh’s gas reserves could be completely depleted by 2033 if no new discoveries are found in the region. The country, which already depends heavily on energy imports, is finding it increasingly difficult to fund its energy deficit, making new exploration projects increasingly attractive. The International Monetary Fund already provided Bangladesh with a $4.7-billion bailout to tackle increased energy costs in 2023, but new oil and gas finds could provide it with a longer-term solution to its energy crisis.
In February, the International Islamic Trade Finance Corporation (ITFC) signed a $2.1 billion financing plan with Bangladesh to fund the country’s oil and gas imports. The State Minister for Power, Energy and Mineral Resources Nasrul Hamid explained, “ITFC has been cooperating with us in oil imports for a long time. Now $500 million can be used to import gas, which will help solve the gas crisis.” The funds will allow state-owned Bangladesh Petroleum Corporation to import oil and Petrobangla to import liquefied natural gas. This provided Bangladesh with a lifeline after its foreign exchange reserves fell below $20 billion at the end of January, enough for just four months of imports.
Bangladesh hopes to increase its trade with Saudi Arabia after the country’s Foreign Minister Hasan Mahmud met with the Foreign Minister of Saudi Arabia Faisal bin Farhan Al Saud in Jeddah this month. Mahmud emphasised Bangladesh’s interest in purchasing more crude from the Middle Eastern power, as well as seeking investment in its refining and petrochemicals industry. Bangladesh currently imports around 700,000 metric tonnes of crude from Saudi’s state-owned oil firm Aramco.
The Deputy General Manager of Bangladesh Petroleum Corp., Zahid Hossain, explained, “It’s very important as we are importing a large volume of crude oil from Saudi Arabia … If we can achieve this opportunity, it will definitely be a great support for us.” He added, “If we can defer the payment longer than 30 days, we would be able to use this ITFC fund to import other refined petroleum products. So, it will ease our financial burden to some extent.” If a payment plan can be arranged, it is expected to alleviate the financial pressure on Bangladesh and help its economic crisis.
Bangladesh is looking to boost its oil production through the announcement of a new bidding round, while also seeking financial support to help it import the crude needed to meet its energy needs. New exploration activities could help provide the energy needed to meet the country’s growing needs, helping to reduce its reliance on foreign energy sources. However, Bangladesh needs a long-term solution to its energy shortages and economic crisis, which likely includes funding from high-income nations to support the rollout of more sustainable alternative energy projects.
By Felicity Bradstock for Oilprice.com