$193m drilling deal signed with Russian oil giant

[Mattrixx]

Dhaka, Apr 26 (bdnews24.com) – The state-owned Petrobangla on Thursday signed a deal with Russian state-run gas exploration company Gazprom for drilling 10 onshore wells in a bid to raise gas output by up to 300 million cubic feet per day (mmcfd).

The deal for the drilling job, which will entail a cost of US$ 193.55 million, was signed at a city hotel in Dhaka.

The Russian company will work as a contractor for the turnkey scheme, and Petrobangla subsidiaries will repay the money to Gazprom for the work upon completion of drilling of each well, officials said.

They said Gazprom would compensate Bangladesh under insurance arrangement in case of any losses of natural gas or damage to gas reserves because of any blowout or any other reasons

Petrobangla chairman Hossain Mansur told bdnews24.com that they were expecting to add 250 to 300 million cubic feet of gas to the national grid per day upon completion of the drilling of these 10 wells.

The Russian company will have to complete drilling of these wells within 20 months of opening LCs (Letters of Credit), according to the deal documents.

Gazprom agreed to drill the wells on a turnkey basis at a total cost of $193.55 million in October.

The company will pay 5.0 percent of the total cost as a performance guarantee, which means Bangladesh would get the amount if Gazprom wants to leave the work during the process of the drilling work.

Gazprom will be the first foreign company to work with Petrobangla in such a drilling exercise without a production-sharing contract (PSC).

The job involves five wells in Titas gas Field.

Titas, owned by Petrobangla, is Bangladesh's second largest gas field, producing around 444 mmcfd of gas, while Rashidpur, owned by Sylhet Gas Fields, produces around 48 mmcfd.

Gazprom will also drill five wells in four other gas structures of Bangladesh Petroleum Exploration and Production Company Ltd (Bapex). The fields are Begumganj, Shahbazpur, Semutang and Sundalpur.

Petrobangla offered work on the development of the wells to Gazprom without tender after Polish oil and gas explorer Poszukiwania Nastyi Gazu Krakow backed out after being selected in a competitive tender this year.

The government then moved to explore new wells under a special law to ensure quick implementation of power and energy schemes.

It empowers the authority to bypass any law that impedes the execution of power projects.

The new law exempts authorities from being challenged in court for any deal like this.

Powered by this special law, the government has negotiated directly with Gazprom and awarded contracts to drill gas wells without tender process.

 

[eastwatch]

The deal with Gazprom is completely commercial type. Gazprom will work to drill or provide technology and machinery support to Bangladesh at a price of $193 million. This deal should be the precedent for deals with other companies in the future. While western companies have been contracted under profit-sharing deals, Gazprom has been contracted for all its goods and services at a certain price.

I wish the govt follows the same Gazporm deal also with other intending drilling companies.

 

[Z Bhai]

FE Report

Russian gas major Gazprom on Thursday inked deals with three subsidiary companies of state-owned Petrobangla to drill 10 development wells at six onshore gas fields in Bangladesh at a cost of US$193.50 million.

Gazprom will carry out the drilling work as the lone contractor and will not have any stake on gas produced from the wells.

This is the first time that any international oil company is engaged in drilling gas wells under a commercial contract. Gazprom is the first foreign company to partner with Petrobangla in exploration without a production-sharing contract.

The Russian firm will drill 10 onshore wells in six discovered gas fields of three Petrobangla's subsidiaries -- Bangladesh Gas Fields Company Ltd (BGFCL), Sylhet Gas Fields Ltd (SGFL) and Bangladesh Petroleum Exploration and Production Company Ltd (Bapex).

Gazprom will drill four development wells in Titas Gas Field -- Titas-19, 20, 21 & 22 -- owned by BGFCL. Titas is the second largest gas field, producing around 452 million cubic feet gas per day (mmcfd) from 15 wells as on April 25, 2012.

The Russin firm will also drill one well -- Rashidpur 8 - in Rashidpur gas field owned by SGFL. Rashidpur gas field is producing around 48 mmcfde gas from four existing wells.

Gazprom will drill five wells -- Shahbazpur 3 and 4, Semutang 6 and 8, Srikail 3 and Begumganj 1 -- in four separate gas fields owned by Bapex.

Of the Bapex's fields Shahbazpur is producing around 7.0 mmcfd and Semutang around 12 mmcfd gas from one well each.

Production of gas from Srikaila and Begumganj has not yet started.

As per the contract, the Gazprom will execute the contract within 20 months from the date of opening letter of credit (L/C).

Gazprom's responsibility under the contract include construction of drilling pad, camp warehouse and site preparation, rig shifting and commissioning, procurement of drilling materials, engagement of third party services, drilling, testing and commissioning.

The contract ensures insurance of contractor's equipment, blowout incident, third-party liability insurance and personnel insurance.

It agreed to pay 5.0 per cent of the total cost as a performance guarantee.

Gazprom Executive Director Yury Skok, SGFL company secretary Mahtab Uddin Bhuiyan, Bapex's company secretary Abdus Sabur and BGFCL company secretary Rafiqul Alam signed the contracts on behalf of their respective sides.

The deal signing ceremony was held in a city hotel where Finance Minister Abul Maal Abdul Muhith was the chief guest.

Bangladesh direly needs much more energy in order to move fast, Muhith said.

He said the country is extremely backward in carrying out necessary drilling activities.

Prime Minister's Adviser on Energy Dr Tawfiq-e-Elahi urged Gazprom to start drilling work as soon as possible to ease gas crisis.

"I hope it is just the beginning of joint work between Gazprom and Petrobangla to ensure energy security of Bangladesh," Yury Skok said, while speaking at the deal signing ceremony.

He said efforts should not be limited to contract on drilling. "We want to involve for a long-term in hydrocarbon exploration in Bangladesh."

Bangladesh has potential hydrocarbon deposits and Gazprom has the expertise to work in different locations across the globe, Skok added.

Executive Chairman of Board of Investment (BoI) SA Samad, PM's Economic Affairs Adviser Mashiur Rahman. State Minister for Power and Energy Muhammad Enamul Huq, Energy Secretary Mohammad Mejbahuddin and Petrobangla Chairman. Hussain Monsur also spoke on the occasion.

Gazprom and Petrobangla officials had several rounds of talks in the past two years over the Russian company's entry into the oil and gas exploration sector in Bangladesh.

Petrobangla offered the development of the wells to Gazprom without tender after Polish oil and gas explorer Poszukiwania Nastyi Gazu Krakow backed out after being selected in a competitive tender two years ago.

Deal with Gazprom to drill 10 gas wells inked