Controversy as Gazprom tasked with exploring gas from Bhola

Despite showing poor performance in the past, the Russian energy company Gazprom has recently been engaged for assessing and exploring gas from two gas fields in Bhola. 

Controversy over the decision did not just stop there. The engagement of Gazprom raised eyebrows as the state-run Bangladesh Petroleum Exploration and Production Company Limited (Bapex) had discovered both gas fields–Shahbazpur and Bhola North. 

But the government is confident about Gazprom as it thinks Bapex “may take more time” doing the same job than the Russian energy giant.

Speaking to reporters at the MoU signing ceremony on January 28, the prime minister’s Energy Adviser Tawfiq-e-Elahi Chowdhury stated that Bapex might take more time than Gazprom in exploring gas.

“It is true that Bapex discovered the gas fields, but it will take more time exploring gas. At the same time, we need gas urgently… Bapex may require five years (to get the job done), but Gazprom can do it much faster,” he concluded.

In 2012, Gazprom was tasked with drilling 10 wells across the country without any tender being floated, under the “Speedy Enhancement of Electricity and Energy Supply (Special Provisions) Act, 2010”.

But sadly, five of the wells–Titas-20, Titas-21, Semutang-6, Begumganj-3 and Shahbazpur-4–were rendered obsolete due to an excessive flow of sand and water while being drilled. 

Soon after the debacle, the state-run Bapex was given charge of the drilling of the wells. 

Despite such a setback, Gazprom was again engaged to drill five other wells, and this time around it has succeeded.

Logo of Gazprom | Collected

According to the Bangladesh Oil, Gas and Mineral Corporation, known as Petrobangla, Gazprom charged up to Tk155 crore for drilling each well, whereas the figure does not exceed Tk80 crore when Bapex drills any well. This means that the state-run company does the same job for almost half the cost that Gazprom charges. 

Despite the two major issues—previous failure and excessive charging—Bapex and   Gazprom have teamed up for a survey to assess gas reserves in Bhola.

The same day, Gazprom struck another MoU with Petrobangla for exploring and extracting gas upon completion of the reassessment.

Both MoUs were signed at the Petrobangla headquarters in Dhaka, in the presence of the state minister of power, energy and mineral resources, and the prime minister’s energy adviser, among others. 

Discovery of the two gas fields

Bapex had discovered Shahbazpur gas field back in 1995. Fourteen years later, it started extracting gas commercially from there, without taking technical support from others. 

There are five wells, but gas is being extracted from only four, Bapex sources said.

Following a 3D seismic survey, the state-owned company in October 2017 discovered the Bhola North gas field at Bheduria, some 35 km off Shahbazpur, making it the 27th gas field in Bangladesh.

Commercial extraction of gas from the only well of the field is yet to start. 

According to experts, gas reserves across 1,000 square km of Bhola stand at nearly two trillion cubic feet. 

What matters most?

Once the exploration is completed, the two companies will fix their share of gas, through a contract under the “Speedy Enhancement of Electricity and Energy Supply (Special Provisions) Act, 2010”. 

This means that Bapex will have to purchase the share of gas that will belong to Gazprom. But if the state-owned exploration company was solely given the task of gas exploration, it would not have to do so, according to the experts.

The deal, which will be struck bypassing the tender process, will also ascertain the amount of the Russain company’s investment in the joint venture. 

Normally, however, a foreign energy company has to undergo a bidding process to win a deal (product sharing contract) for offshore and onshore oil and gas exploration in Bangladesh. 

During the government’s previous tenure, Bapex undertook an initiative to develop 108 onshore wells between 2016 and 2021. 

Of the wells, Bapex was supposed to search 53 wells, dig 35 development wells, and complete the works of 20 wells to realise the government’s Vision 2021.

But the plan has been recently revised as only four wells were drilled until June last year, according to media reports. 

Bangladesh is already facing a massive gas supply shortage of 1,200 mmcfd, against the daily demand of 4,000 mmcfd.

Irregularities behind the deal

Hinting at “commission trade” in awarding the gas fields to Gazprom, Anu Muhammad, member secretary of the National Committee to Protect Oil, Gas, Mineral Resources, Power and Ports, said: “There might be irregularities behind this. Our experience shows that Gazpom not only failed in many cases, but also charged almost double as compared to Bapex.”

Not only that, Gazprom could not also help local manpower adopt skills as expected, Anu Muhammad observed.   

He also raised questions about the law under which Gazprom will sign a contract for gas extraction.

“Why does the government prefer the law in awarding oil and gas fields to foreign companies? Why is it extending the law repeatedly?” he said.

When contacted, Energy expert Badrul Imam said: “If Bapex alone extracted and explored in Bhola, it would have been cost-effective and institutionally encouraging.”

Terming Bapex capable of drilling up to four wells annually, he said: “It has the necessary manpower and financial capacity to drill the wells in Bhola. There is no reason that Bapex cannot be solely assigned to develop the gas fields.” 

He, however, claimed that Bapex also had some limitations, as shown by evidence of mismanagement on its part.