Pankaj Sharan, the Indian High Commissioner to Dhaka on Monday said that India's ONGC Videsh Ltd had won the deal to explore gas in the shallow water in the Bay of Bengal.
"For India, winning the bid for oil and gas exploration, has opened a new chapter for both the countries. The signing of the deal has taken place in an appropriate time. It's a milestone in the relationship of two countries - Bangladesh and India," Pankaj Sharan said.
His comment came in a deal signing ceremony between the state-owned exploration agency Petrobangla and ONGC Videsh Ltd for exploration of hydrocarbon in two shallow water blocks -SS-04 and SS-09- in the Bay of Bengal at Petrobangla office.
Finance Minister Abul Mal Abdul Muhith, who was the chief guest at the signing ceremony, said that the country's gas infrastructures are quite extensive and the country also previously worked with international partners in the seventies.
He also said that ONGC Videsh and Oil India which have track record of performance and professionalism will implement the agreement and this will go a long way in meeting our increasing demand for oil and gas.
With the deals the ONGC Videsh Ltd has been authorised to explore Bangladesh's first discovered offshore gas field, Kutubdia, as well. Kutubdia was offered under a 'special package' and was tagged with SS-04 during the bidding round.
ONGC Videsh has committed to spend US$58 million for block SS-04 and carry out 2,700 km-long 2D seismic survey, 200 sq km 3D and drill two wells during the contract period.
For block SS-09, ONGC has agreed to spend $85 million and conduct at least 2,850 km-long 2D seismic survey, 300 sq km 3D and drill three wells during the contract period.
Dr. Hussein Mansur, chairman of Petrobangla, while talking with The Daily Observer said that we need a lot more gas to sustain and further enhance the steady growth the country is achieving and hoped that this deal signing between two countries will bring a great success.
He also informed that ONGC Videsh had submitted bids for these two shallow-water blocks out of nine that were offered by Bangladesh in the latest bidding round in December 2012.
With the signing of PSCs the Indian company will be able to enter into Bangladesh's oil and gas exploration activities. The contract period for exploration will be eight years with a five-year initial period and a three-year subsequent exploration. The contractors 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 floor price for HSFO (high sulphur fuel oil) has been fixed at$100 per tone and the ceiling price at $200 per tone.
The latter is worked out of around $5.50 per Mcf (1,000 cubic feet) besides a 37.5 per cent corporate tax that has to be paid by the contractor.
Other features of the PSC are: the licence holder will have right to full repatriation of profits without any signature bonus or royalty and need not to pay duty for equipment and machinery imported for operations during the exploration, development and production phases and will have 100 per cent cost recovery and production bonuses, the official said.