Santos Sangu Field Ltd from next Sunday will start supplying 20 million cubic feet of gas daily to a power station of the Power Development Board in Chittagong from the newly drilled Sangu-11 well at a negotiated price, said Petrobangla chairman Hossain Monsur.
Monsur told New Age that Santos, at the same time, would stop producing gas from the decade-old Sangu field due to fall of gas pressure after the wells had yielded half a trillion cubic feet of gas.
Santos, an Australian oil company operating in hydrocarbon block-16, is now supplying daily less than 10 million cubic feet of natural gas from three wells in the Sangu field to the national grid at a price of $2.91 per thousand cubic feet, which is specified in the production sharing contract.
When asked, Santos Bangladesh’s vice-president ABM Sirajuddoulah said that they would start supplying gas to the PDB power station whenever Petrobangla allows them.
The PDB decided to start buying 20 million cubic feet of gas a day for two years from Santos from the newly drilled Sangu-11 well in hydrocarbon block-16 by initialling an agreement on Wednesday.
Santos on the day also initialled another agreement with the state-run Karnaphuli Gas Distribution Company Ltd for transport of gas.
According to the agreements, the PDB will pay $4.5 for per thousand cubic feet of gas a day in foreign currency while it buys gas at $1.13 from Petrobangla in local currency. The PDB will also have to bear the charge for gas transport.
The deal will make the
PDB pay $1,00,000 more a day than necessary in purchasing gas from Santos, due to its ignorance of the current market situation, said Petrobangla officials.
With this agreement, Santos has set the first instance of selling gas directly to a consumer at a negotiated price.
Other foreign companies sell gas to Petrobangla at a rate specified in the production sharing contracts.
PDB chairman ASM Alamgir Kabir said that the gas would be fed to the two units of Sikalbaha power station in Chittagong in a day or two, although the final agreement is yet to be signed as the Cabinet Committee on Purchase is yet to approve the power purchase agreement.
When asked, a PDB official said that they were going to buy the gas for power-starved Chittagong with the permission of the power ministry.
The PDB will sign the agreement after the approval of the purchase committee.
The US-based Shell Oil Company in 1997 discovered the Sangu field in hydrocarbon block-16 in the Bay of Bengal, which had around 0.5 trillion cubic feet of recoverable reserve.
Later Shell’s successor, Cairn Energy Bangladesh, unrealistically estimated the recoverable reserve at around one trillion cubic feet and increased gas production up to 220 million cubic feet a day, which many allege was done to recover their investment in a short time.
By 2009, Sangu’s gas production dropped significantly and its operator, Cairn Energy, started pursuing Petrobangla to sign an amended PSC on 26 November, 2010, allowing it to sell gas from any ‘newly discovered’ field of block-16 to a third party at a negotiated price.
Cairn sold its stake in hydrocarbon block-16 to Santos immediately after Petrobangla signed the amendment.
Santos, after assuming 100 per cent ownership of hydrocarbon block-16, started drilling exploration wells from October 2011 and hit a small reserve of 20 billion cubic feet of gas near the Sangu gas-field.
The Australian company said that it would supply 20-30 million cubic feet of natural gas per day from the Sangu-11 well for two to three years.
Santos, before starting drilling for oil and gas in the Bay, set the minimum price of gas at $4.5 per thousand cubic feet, but Petrobangla buys gas at $2.9 per thousand cubic feet extracted from Sangu’s old wells.