Dhaka (Platts)--10Dec2012/446 am EST/946 GMT

Bangladesh Sunday launched its 2012 oil and gas offshore bidding round after several delays.

It is offering 12 offshore blocks in the Bay of Bengal, nine in shallow water and three in deep water, including two discovered shallow water fields, Kutubdia and Teknaf, under "special package" terms for exploration.

Prospective bidders or the operator in a joint venture bid must have offshore daily production of at least 15,000 barrels of oil or 150,000 Mcf/d of gas to qualify and will be permitted to bid for more than one block, Petrobangla's Director for Production Sharing Contracts, Muhammad Imaduddin, said at the launch.

Petrobangla will release bidding documents December 17 and accept bids until March 14, 2013, he said.

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Awarding of the blocks will be completed over June to mid-July 2013, Imaduddin added.

As part of the special package of conditions for Kutubdia and Teknaf, license holders will have to give state-owned Petrobangla an additional 5% of the gas produced, on top its regular profit-sharing structure.

State-owned Bangladesh Petroleum Exploration Company, or Bapex, will take 10% carried interest stake in all the shallow water gas blocks.

The gas price has been pegged to high sulfur fuel oil prices, with a floor price for HSFO fixed at $100/mt and a ceiling price at $200/mt, equating to around $5/Mcf before tax.

"For shallow water gas blocks, the gas price will be 100% of HSFO price ex-Singapore with biddable discounts,' Imaduddin said.

For deepwater blocks, the gas price will be 110% of HSFO price ex-Singapore with biddable discounts, he added.

In the country's last bidding round in 2008, the floor price for HSFO was fixed at $70/mt and ceiling at $180/mt, equating to $4.50/Mcf before tax.

Cost recovery is capped at 55%/year for all available oil, natural gas, condensate or NGL.

The contract period is eight years, with a five-year initial exploration period and a three-year subsequent exploration period, Imaduddin said.

There is a provision for unitization between adjacent blocks where a single geological structure spans both blocks, said Imaduddin.

Gas export has been prohibited under the new bidding round. In the 2008 bidding round, gas exports via pipeline were prohibited but liquefied natural gas (LNG) exports permitted.

Companies will be able to sell the gas produced directly to third parties in the domestic market without going through Petrobangla but the latter will have first right of refusal, he said.

ADHERE TO BOUNDARY DISPUTE VERDICT

The blocks on offer adhere to the March 14 verdict of the International Tribunal for the Law of the Sea that settled a maritime boundary dispute with neighboring Myanmar. No block disputed with India has been offered.

In line with the verdict, Petrobangla has dropped eight deepwater gas blocks it offered in 2008 and excluded 11 others due to its maritime boundary dispute with India, which is pending settlement in 2014.

The three deepwater gas blocks in this round were offered in 2008 with ConocoPhillips named preferred bidder, but were not awarded due to the boundary disputes. Three other deepwater blocks from the 2008 round that were sought by ConocoPhillips have not been re-offered.

In the February 2008 round, Bangladesh offered 28 offshore blocks, 20 in deepwater and eight in shallow water, but the response was lukewarm due to the maritime boundary disputes.

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

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