Bangladesh has taken a long-overdue step to revive interest in domestic hydrocarbon exploration by finalising the Offshore Model Production Sharing Contract (MPSC) 2025.
With an eye on attracting International Oil Companies (IOCs), the new framework introduces market-aligned pricing, robust cost recovery mechanisms, and mandatory work obligations. These reforms reflect a clear shift towards aligning national policy with global standards-- an urgent necessity given the country's mounting energy crisis.
The core highlight of the new model is the gas pricing mechanism indexed to Brent crude oil. Deep-sea gas will now be priced at 11 percent of Brent's three-month average, while shallow-sea and onshore blocks are set at 10.5 percent and 8-8.5 percent respectively, depending on terrain.
A floor of $70 and ceiling of $100 per barrel provides a predictable yet competitive range, reducing investors' uncertainty without burdening national finances with runaway prices.
This represents a significant improvement over the 2023 model, which pegged gas at a flat 10 percent of Brent, capped at $100 per barrel. That earlier framework failed to attract any bids underscoring the need for terms that offer both returns and regulatory clarity.
The 2025 model now promises exactly that, with not only better pricing but also guaranteed cost recovery for pipelines and infrastructure, to be structured under specific petroleum sales agreements.
More importantly, the updated framework demands faster and more serious exploration activity. Stricter work obligations will require companies to undertake 2D and 3D seismic surveys shortly after contract signing.
This could lead to quicker identification of prospects and more efficient development timelines something the energy sector has long lacked.
Transitioning from LIBOR to SOFR as the financial benchmark in payment terms is another prudent move, reflecting the global financial shift and reducing exposure to volatility.
However, policy alone will not solve the looming crisis. Domestic gas production currently stands at around 2,300 mmcfd, while demand hovers around 4,000 mmcfd.
Imports plug only part of the gap, leaving a deficit of nearly 1,000 mmcfd. Reliance on LNG imports costing around $13 billion annually has placed an unsustainable strain on national reserves. Without significant domestic discoveries, the situation is set to deteriorate within years.
Bangladesh's energy future hinges not just on reforming contracts but on executing exploration with urgency. Political stability, transparency in bidding, and timely approvals will be essential to convert policy into production. The groundwork is now laid. What remains is action.
