Dhaka (Platts)--27Feb2013/549 am EST/1049 GMT

Bangladesh is considering a 10% hike in the price for gas produced at 12 offshore blocks being offered in its latest bidding round after prospective bidders deemed the current price too low, a senior Petrobangla official said Wednesday.

State-owned Petrobangla has proposed the 10% hike in a request to the Energy and Mineral Resources Division of the Ministry of Power, Energy and Mineral Resources, the source said.

This follows a pre-bid meeting on February 7 in which prospective bidders argued that the gas price set in the model production sharing contract, or MPSC, was too low. The meeting was attended by officials from more than a dozen major international oil companies including US-based Chevron, ConocoPhillips and ExxonMobil, Anglo-Dutch Shell and China's CNOOC.

The current MPSC pegs the gas price to high sulfur fuel oil prices, with the floor price for HSFO fixed at $100/mt and the ceiling price at $200/mt. This equates to around $5/Mcf before corporate tax.

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In its proposal to the ministry, Petrobangla argues the ceiling price for HSFO should be $220/mt, which would equate to a gas price of $6/Mcf before corporate tax, the official said.

Bangladesh's previous bidding round was in 2008, for which the floor price for HSFO was fixed at $70/mt and the ceiling price at $180/mt, equating to a gas price of around $4.50/Mcf before corporate tax.

Petrobangla launched the latest bidding for 12 oil and gas blocks -- nine in shallow and three in deep water -- on December 9, 2012, with the deadline for submissions March 18.

In the 2008 bidding round, gas exports via pipeline were banned but LNG exports were allowed. In the latest round, all gas exports are prohibited but companies will be able to sell their gas directly to third parties in the domestic market without going through Petrobangla, which will retain first right of refusal.

The country expects successful bidders to begin exploration by year end.

--Mohammad Azizur Rahman, newsdesk@platts.com
--Edited by Wendy Wells, wendy_wells@platts.com

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